When you’re reviewing your receivable balances and they may or may not be overdue, there are things to watch out for when assessing their recoverability. 

Account receivables are prone for third party conditions you are most often not aware of. You may not know what’s exactly going on, so doing your best to stay in touch with your customers even if they are late just one day, is your best source of information I would say.

The indications when you might start to question your receivable balance value are as follows (note that the list is no particular order):

o     Payment discipline is not all that good; there are regularly invoices that are overdue.

o     A customer usually always paying on time is having difficulties with just one payment – find out the source of problems.

o     There are news from the market that certain types of businesses are facing either just hard times (i.e. not so many sales any more) or regulatory impacts (i.e. there are taxes they have to pay upfront etc. causing liquidity problems).

o     You heard or read from the news that the client went to bankruptcy.

o     The client operating in foreign countries may face difficulties in paying with foreign currencies abroad (i.e. the country they operate doesn’t allow any foreign currency transactions cross border).

o     Your customer just faced a fire or some other form of destruction of property.

The list above is not inclusive meaning that there may be conditions specific to your country, business or situation that should raise a red flag and make you reach out to your customer immediately.