How to tell if someone is going to rip you off

They say you can see a swindler a mile away. I’m starting to believe it. Here’s how I tell if someone is planning to rip me off before I get ripped off. Caution: Take it with a grain of salt. We just had to hire a collections agent.

The five signs:

  1. The person will almost always gladly pay the first bill, or your deposit amount. It’s the second and third bills you need to look out for. The swindler will pay the first bill to convince you that they’re going to pay future bills. Don’t be fooled.
  2. The swindler almost always talks a lot. They will drop names to sound like they’re respected in the community. By talking a lot, they’ll control the conversation and put you at unease.
  3. Often will have very ambitious business goals along with high confidence. This is an opportune time to quiz them on their awareness of what their competitors are up to. Often they won’t know much and have very bad plans.
  4. Don’t assume your friend will pay you back. Your friends can go sour. I’ve had several friends who I worked with for years suddenly stop paying bills and leave me dry. Tell friends you won’t continue working until they pay you.
  5. If someone is planning to rip you off, they’ll ask very few questions about your pricing. They’ll barely look at your proposal/estimate and be more concerned with how quickly you can complete the project. Since they’re not planning to pay, they don’t ask the usual money questions other clients do. This is a key signal! I’ve seen it multiple times.

So what do you need to do?

Actively collect on all of your accounts. You’re in business to make money, don’t let customers go 45+ days without a phone call from you or your accounting department. Send invoices and statements regularly, you want to be invoicing customers weekly and keep your cash flow going.

For new customers, get payment up front. This will help weed out the swindlers. Just do it.

You are not a bank! If a customer asks about a payment plan, give them one with interest if you think that will encourage them to pay. Remind customers with late balances that you take credit cards (if you do).

I hope these tips will help you to never lose money from a bad customer.

8 responses to “How to tell if someone is going to rip you off”

  1. I’m with ya there. Our biggest problem is getting paid in a timely manner from almost all of our customers. That being said, we’ve never had to use a collection agent – sorry to hear that you guys have.

    One thing I’ve discovered is that it was an enormous help to hire an admin person who’s top priority is to get us paid. I’ve done that and it’s been huge weight off my shoulders.

  2. I am totally with you on the signals and red flags thing. I’ve noticed another red flag is hyper-enthusiasm. I once had a guy who was so pumped up about his new business concept. I smelled a rat, so I declined the business. He literally begged that we take him on, so I finally consented.

    We then had a 3-hour conversation where I helped him plan out his business and get enough information to prepare a quote. At the end of the conversation he admitted that he didn’t even have a business bank account set up yet…

    He later sent an email where he showed his new logo, which was plagiarized from a logo we had designed. And of course I never heard from him again.

    In the case of collections, I find that notifying clients just 15 days after they’re late is good. We also send another notice at 30 days. Also, charging a late fee is important because then there’s a penalty to paying late. Finally, I sometimes personally make phone calls to inquire. Between all those things, it usually does the trick, and we actually wind up collecting over 99% of our receivables!

    Interesting topic…

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