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Red Flags and Credit Worthiness

Determining the credit-worthiness of a potential client can be a daunting task, even for seasoned professionals. A brand-new company with few assets might spoil you with glittering generalities and promises of prompt payment, but no assets can turn into aging receivables quicker than you think. Before you extend credit to a new client, it’s best to give them an in-depth review to ensure that your money isn’t getting thrown away.

With unforeseen business issues such as bankruptcy, transfers, sales, or even death, the process of lending money can get a lot messier than anticipated. Because of this, it’s good to prepare for these circumstances and evaluate all potential risks prior to beginning the lending process. While these problems can devastate anyone and any business, there are some warning signs or red flags to look out for that might indicate that a business you’re working with might fall victim.

Know Your Clients

The first thing you’ll want to do when you get a new client is run a few generic tests on them. Check their county court’s website for any records of them being sued. You’ll have access to the total balance sued for, which gives insight to their financial state. Balances of less than two thousand dollars should raise major red flags, as it indicates that they weren’t able to pay back this nominal amount in a timely manner. At the same time, also take caution if you notice very large balances as this might show that the debtor might not have been actively trying to pay the balance.

No matter what the balance is, there’s a reason it hasn’t been paid and it’s probably smart to talk to the potential client and see if there might have been other circumstances interfering with their ability to pay back their creditor. Quick lien searches on the owner won’t give you much insight to a company’s assets, but it will give you a good liabilities picture. If nothing pops up when you search the municipal court or common pleas website for liens, also run a quick search on the business and its principles. Make sure you’re checking a few neighboring counties for the most holistic view.

If you’re looking to get an asset picture on the owner, search for the company’s agent and incorporator on the Secretary of State’s website. Sometimes the incorporator and the owner are the same person, but if not, look at who they are and do some research on them, too. If the company was incorporated within the last six months, this should raise some red flags. If they don’t have a lot of money behind them and they’ve only been open for a few months, make sure you’re really investigating before you loan them anything. If they have a lot of money behind them, then not having a lot of credit shouldn’t be too much of a concern; they should be willing to sign a personal guarantee. Companies open for upwards of ten years are a safe bet; a nice website and positive reviews mean you’re probably lending to someone who’s creditworthy and will pay you back in a timely manner.

Proactive Awareness “Red Flags”

A good way to learn more about their financial responsibility is to call their credit references. Ask the referrer’s specific questions about how often your potential client misses payments, is late on payments, and the current terms they’ve agreed to. It might also be beneficial to ask if they’ve ever disputed a bill and if they have what the nature of it was. Having a previous dispute is not automatically a red flag, however, having several disputes might be cause for concern. Also run a search to see if the business (or business owner) has ever filed for bankruptcy. While you likely won’t see this, it’s a huge red flag that’s worth further investigation if you do.

The best thing that you can do with your current clients to ensure that you collect payment is work with them. As long as both parties are communicating their concerns openly, you shouldn’t have a problem.

Collecting payments can be difficult and often times are unsuccessful if you don’t collect within the 60 days past due, which is why companies like ours exist. Whether you have a difficult client that’s avoiding payment or you are part of a high-volume business that naturally experiences collecting on clients, unpaid balances can quickly become a large issue that puts a damper on your own cash flow. If you’re looking for professional, firm and polite collection assistance, give Turbo Debt Recovery a call today.

Timing & Excuses- Knowing When to Place With TDR

When operating a business, the thought of chasing customers to collect the money your business is owed probably isn’t the first thought on your mind; that is until your receivables start to accrue day by day and month by month. At Turbo Debt Recovery, we’re here to provide solutions to collect your unpaid invoices. Not getting paid for services performed or products sold can severely affect your cash flow. Whether this is a one-time issue or an ongoing occurrence, you need to be aware of how to handle these situations and when it’s time to place your uncollectible debt with our office.

Businesses need to be firm about receiving payments from a customer. Rather than hoping for the best-case scenario, the decision maker at the company needs to act promptly on excuses so they can collect their money.

The Runaround

When business owners or decision makers are trying to decipher between the correct time to place an account with a debt collector versus holding on to it because they think they’ll recover the funds themselves, they need to ask themselves the following; how old is the account and is the debtor going to pay us? Aging receivables will always be a problem. Correcting the issue starts with your internal team reviewing their aging report. What does it look like? Numbers should be getting smaller as each 30-day window passes. The earlier you place an account, the quicker and higher chances of recovering the balance in full.

Now let’s move to the second question; are they going to pay us? If you knew, you’d have your problem solved without us, but chances are, you don’t know. We’re here to uncover the issues, work the accounts appropriately, and get the accounts collected in full.

Below are several examples of what we call the “runaround”:

  • My boss is out of town, but he will be back next week. We’ll be sure to make the payment upon his return.
  • It is my busiest time of the year; I’ll be sure to get you paid when I can get to it.
  • We put the check in the mail.
  • We don’t have the money to pay.

I’ve personally seen the runaround occur too often when these debtors are trying to avoid payment. If they have not stated that they are going to dispute it, this is another way of saying they are not going to pay it.

How To Fix This?

Look into a debt collection agency. See if their objectives align with your own.

I understand the hesitation from the business owner’s perspective about not contacting a debt collection agency. They don’t want to give away a percentage of the payment. If there is a $10,000 invoice, our company could charge about 25% (rate typically lower; this is for example only). The mindset of the business owner is, “I don’t want $7,500, I want the entire $10,000.” Another thought going through the business owner’s head may be, “I’ve collected a debt that was 3+ months old before. Why would I place with TDR?”

My answer is simple: Sure, you may collect some old debts from time to time. But I’d say the odds are heavily against you once an invoice goes unpaid for more than 60 days. Placing accounts with us is supposed to help correct this issue of writing off a lot of bad debt at the end of the year. Overall, after one-quarter of using our services, you should see a difference in your receivables and revenue generated from us.

If you are the business owner, you need to ask yourself the questions below. It is important that you realize that for each day you are not getting paid for your services performed or products sold, the chances of collecting that money decreases rapidly:

  • Less than 30 days (within the normal Net 30) = 90%-95%
  • 30-59 days = 70%-90%
  • 60-89 days = 60%-80%
  • 90-120 days (rapid decline) = 15%-50%

Questions to Ask Yourself

  • Have you received the runaround?
  • Have they been in debt with us before?
  • Are they not returning calls?
  • Is it 15 days past the original terms of the invoice?


If your business sends out a Net 30 invoice, on the 31st day, you should follow-up to get a status on the payment. If you receive the runaround, that’s when you will need to put on your investigative hat. By the 35th day, if they still haven’t given a concrete answer on when the payment is arriving and how it will be paid, you should start talking to us.

If you wait as long as 60 or 90 days, your chances of recovering this debt (liquidity rate) profoundly decline. Between 30-60 days, typically, you have a 70%-90% chance of recovering. If you wait 90-120 days, the percentage drops as low as 15%.

An issue I’ve seen, which has a drastic effect on the liquidity rate is, placing one large annual batch of claims for collections. As described above, if claims are past the 120-day delinquent mark, we likely will not be recovering as much as we can at the 30-60 day mark.

We at Turbo Debt Recovery Group will review your current in-house process. Next, we will discuss ways to improve your process. We will show you ways to detect the “runaround.” Finally, our company will implement an in-house process that is very simple to follow. At this point, our client should start to see a higher return.