Is one of your customers heading for trouble?

The early signs are usually small: excuses, slower payment, promises that are not kept, a progress claim that goes unpaid, being passed from person to person, a customer who only calls when they need you. One on its own proves nothing. Noticed early, they are your chance to act while the customer is still talking to you. And sometimes there are no signs at all, which is why what you set up before anything goes wrong matters most.

Everything’s fine until it’s not

Plenty of good businesses that never had a problem with non-payment are now seeing slow payment they have never seen before. When you need the work, you take on more risk. And if you have never been caught before, why would you even be thinking about it? The number of people who end up unpaid and never saw it coming is baffling.

Most of the customers who end up in trouble are not bad people, and some of them were your best payers. What changed was their capacity to pay, not their character. Nobody has a crystal ball. What you do have is the early indicators, and the discipline to act on them.

Sometimes there are no warning signs

One of the most important things to understand is that sometimes you can see it coming, and sometimes you genuinely can’t.

One of our clients had been supplying a customer for around nine years. The customer spent somewhere around $30,000 to $40,000 a month with him and had never really had an issue paying. Then one month the payment was late. Not dramatically, just later than normal, and it stretched out far enough that the question started to form: is he actually going to pay this?

Then the customer walked into the premises. Our client genuinely thought he had come in to pay his bill. Instead he said: “I can’t pay you. I’m going into liquidation.” It says something about that business owner’s character that he went in and told him himself. But it threw our client for a six. He simply had not seen it coming.

When we went back to the signed credit application to establish which company owed the money, it uncovered a bigger problem. The customer operated through more than one legal entity, and the one written on the application did not exist. Because the customer was still talking, our client asked to get the paperwork corrected into the proper name, and we looked at whether a security interest could still be registered on the PPSR. We knew by then it was very unlikely to change the outcome. The liquidation was already underway, and he was owed about $25,000. The lesson was that it had been picked up far too late.

The sentence we hear again and again is “they’ve always been a good payer.” And our answer is often: yes, until they’re not. Nine years of good payment is a relationship worth having. It is not a risk management strategy.

Other times, the signs are absolutely there

Excuses, and slower payment

The payments that used to arrive on time start arriving late, and each late one comes with a reason. Sometimes it builds slowly. Sometimes it comes out of the blue. Either way, the question to ask yourself is simple: are they making excuses?

Promises, then silence

It will be sorted. It is coming this week. They promise two or three times, and then, all of a sudden, they go dead quiet. One of our clients had worked with a builder for years without an issue, and then it just stopped. When something has gone wrong, the person you supply is more likely to hide from you than to tell you.

A convincing explanation, and still no payment

This sign is harder to recognise because it sits with the person. You might really like them, and you might have worked with them for years. They are charismatic and optimistic, and they have always got a plan. This contract is coming through. That payment is arriving. This investor is involved. This project is going to fix everything. And they may genuinely believe it themselves. It does not mean they are setting out to deceive you. Some people are playing a lot of different avenues at once, trying desperately to keep everything moving.

Meanwhile, they still haven’t paid you. Because you trust them, you keep working, keep extending credit, keep supplying labour and materials, and your exposure keeps growing. Good communication does not necessarily equal financial capacity. At some point the question has to become less about how convincing the explanation is, and more about whether the obligation is actually being met.

Getting paid gets harder and harder

Particularly through 2025, we worked with a number of businesses whose customers eventually went into liquidation, and one pattern came up again and again: getting paid became harder and harder before it happened. Suddenly there was a much bigger rigmarole around getting a payment through. More hoops, more loops, more questions, more people to speak to. The person who used to approve it suddenly couldn’t. A payment claim that used to move through smoothly needed checking by somebody else, then somebody else, then somebody else. It was always waiting for approval, or sitting with another department.

Sometimes the only time they get in touch is when they need more stock, and the moment you stop their credit, they suddenly find the money to clear the account. None of this automatically means a company is heading for liquidation. But when a customer who has paid normally suddenly develops an increasingly complicated process around releasing your money, it deserves attention. Ask one question: has there been a change of management, or is this how they have always operated?

A progress claim that goes unpaid

If a customer does not pay a progress claim, you have an early warning before you pour more labour, materials and risk into the job. A disputed progress payment is far better to surface at $48,000 than at $120,000.

“The last guy let me down”

A customer rings asking you to come and help out, because the last trade let them down. Sometimes that is exactly what happened. But it is worth thinking it through: did the last person let you down, or did you just stop paying them?

Changes that only a credit check or the register will show

Some signs never show up in how a customer behaves with you. A director changes. They stop paying someone else. A company closes and a new one opens in someone else’s name. You can set up credit alerts that tell you when a director changes or a non-payment is recorded elsewhere, and a fresh credit check tells you more than a customer’s track record with you. Even then there are things a credit check can’t always show you, like tax owed to Inland Revenue.

Commercial instinct

People come to us and say they had a funny feeling something was going to go wrong, then went ahead anyway. Sometimes you just have a gut feeling. Listen to it.

What these signs usually mean

Looking at all the liquidations we have seen in the marketplace over the years, this kind of behaviour comes before them. The runaround, the silence, the customer who only pays when they need you. It is a sign of an unhealthy business, and it is worth taking seriously even when the amount owed is small.

A payment problem is often the final symptom. The overdue invoice is where the problem becomes visible, and it usually started well before that. A customer who was financially stable six months ago may not be today. The risk is that early red flags get tolerated, because the relationship is good and nobody wants to be the one to raise it.

While the customer is still engaging with you

What you can do depends on how communicative the customer still is. While they are talking to you, you have options. One of our plumbing clients got a general security agreement signed by a developer who was struggling because the developer was still trying to do the right thing. Once a customer goes quiet, they are not going to sign anything. If you wait for something to go sideways before you secure yourself, the horse may have already bolted. And security taken late can itself be challenged if they do go under.

Responding when payment behaviour changes

• Follow up the day a due date is missed, before the next invoice falls due and the balance compounds.
• Reduce the credit you extend, and shorten the term. The best credit control is not to provide credit at all. Reducing how much you extend, and for how long, is a good first step.
• Require payment before release of the next delivery or the next stage of the job.
• Run a fresh credit check, because circumstances change, and hold the account to its credit limit.
• Test your position. If this customer failed tomorrow, where would the business stand?

You are not trying to become a fortune teller

You will never identify every business that is going to fail. Some customers will give you warning signs. Some won’t. Good credit control cannot guarantee that nobody will ever go into liquidation owing you money. What it does is make sure you have done what you reasonably can before that happens:

• you know who you are dealing with
• your documentation is correct
• your exposure is visible
• your security interests are dealt with where appropriate
• you notice when behaviour changes
• and you have boundaries around how much more credit you are prepared to keep extending

Because once somebody walks through your door and tells you they are going into liquidation, most of your meaningful options have already disappeared.

Setting up accounts so problems surface early

The best time to get protection signed is at the beginning of a project, before anything has gone wrong. That includes terms of trade that allow you to suspend work if you become aware a customer is likely to be insolvent or presents a financial risk. And the faster you invoice, the faster you find out. Invoicing faster means you identify the non-payers and the potential disputes sooner, and you find out who is testing you sooner rather than later, while there is still time to do something about it.

Every sign on this page is easier to act on when the account was set up properly in the first place: the right legal entity, signed terms, security where the job warrants it, and a customer who knows how you work. We go through that in checking a customer before you give them credit.

If a customer of yours has already gone under, start with what happens to your money when a customer goes into liquidation.