Dealing With Troubled Customers

by Ian C. Perry and Roman A. Basi – Basi, Basi & Associates | Published March 2026

 

 

It doesn’t take too many nonpaying customers to create an expensive problem. In fact, far too often today a pressure washing contractor or business owner must be concerned not only with his or her own operation’s financial well-being but also with the financial situation of both customers and suppliers.

There are always customers that go out of business without warning or without paying their bills. In these cases it is often too late to collect anything. However, if the owner or manager of a pressure cleaning operation or business is vigilant about outstanding accounts receivable and the financial status of all customers, there are strategies for dealing with troubled customers before the dreaded final step of “firing” them.

 

Recognizing Troubled Customers

It’s far easier to take a proactive approach by avoiding the types of customers/clients that usually spell trouble. Staying alert to signs that long-time customers may be having financial problems and, most importantly, taking quick action when their payments are slowing down is a viable strategy.

Although a credit check is important, it’s not a fail-safe. Because things can go south quickly, minimizing exposure to a customer or potential customer’s credit troubles requires every pressure cleaner to exercise “due diligence.” In other words, minimizing their operation’s exposure to the credit troubles of others in the beginning—and at every step of the relationship—is vital.

Due diligence also means staying on top of paperwork. It is all too easy to fall behind on invoicing in the midst of big projects, but letting it slide for a month or two will put any business at risk. To avoid this problem, establishing regular routines for billing customers that reflect their preferences, such as sending an invoice every two weeks, might be a good strategy. If customers start taking longer than usual to pay, it is readily noticeable.

Staying alert for signs that customers’ financial situations are changing can protect any business. If, for example, a customer ignores or doesn’t return phone calls, it may mean nothing. However, if three or four calls have been ignored and the last payment was late, it could mean the customer can’t afford the work but hasn’t gotten around to telling you.

 

Finders, Keepers

Remember the old saw about possession being nine/tenths of the law? Possession of the funds collected may not be forever, but it does give a pressure cleaning business negotiating leverage in a lawsuit or bankruptcy when trying to avoid paybacks.

Don’t hesitate to accept payment on account because of the possibility that the payment may be refundable as a “preference” if the customer files bankruptcy. It is not wrong to accept money genuinely owed to the business; neither is it wrong of the soon-to-be-debtor to pay it. It simply may be recoverable by a bankruptcy trustee.

 

Even Creditors Have Options

When a customer fails to pay his or her debts, the pressure cleaning business, the “creditor,” has several remedies available to help collect the funds due. In addition to the common collection strategies such as dunning notices, collection agencies, and even small claim courts, there is bankruptcy.

If a business owner or manager is aware of a customer’s bankruptcy, even informally, they must act to preserve the operation’s rights. All too often, when a bankruptcy notice is received, the assumption is made that there are neither rights nor alternatives when it comes to the claim of the pressure washing business. Creditors do have rights, fortunately.

Most courts hold that a creditor with actual knowledge of the case, however obtained, will be bound by the deadlines for filing objections to debt discharges and for filing claims. For example, creditors in a bankruptcy are entitled to share in any distribution from the bankruptcy estate, usually depending on the priority of their claim.

Naturally, when a notice of the bankruptcy is received, proof of a claim should be promptly filed with the court. And keep in mind that deadlines are strictly enforced in bankruptcy cases.

When it comes to dealing with a customer or supplier after discovering they are bankrupt, all collection efforts should cease. This automatic stay is designed to protect the debtor and his property from all forms of collection during the bankruptcy.

Under the bankruptcy laws, creditors usually have the right to be heard in court regarding a payment plan, liquidation of the debtor’s non-exempt assets, and payments from the assets of the debtor’s “estate.”

In other words, creditors can voice their opinions about debts that might or might not be forgiven. They can also argue about assets that, perhaps, should have been included in the bankruptcy estate but weren’t.

So-called “secured creditors” are at the top of the payback list and have specific rights to the property, which is the collateral for their claim. Secured creditors also have the best chance of getting relief from the automatic stay or “adequate protection payments” to prevent a decline in the equity available to secure their claim.

Whether the pressure washing operation is a secured or unsecured creditor, the best deterrent to abuse of the bankruptcy system is creditor vigilance. Creditors are entitled to question the debtor under oath about assets, liabilities, and financial history at the first meeting of the creditors.

Also keep in mind that some bankruptcies are dismissed because of the debtor’s failure to comply with the requirements of the bankruptcy law. When that happens, creditors are free to pursue collection according to state law. Sometimes cases originally classified as “no asset” cases blossom into asset cases from which a dividend may be paid. Be vigilant.

 

Fighting the Good Fight

Most business owners and managers are aware that contracts and payment terms should always be put in writing. Unfortunately, this alone may not protect the business if a customer runs into financial problems. Few troubled customers are likely to begin paying simply because there is a contract.

Depending on one or two customers can put any pressure cleaning business at risk should payments from one of them slow or dry up. Even a business whose plate is full might be well advised to continually look for new customers.

Make sure there is a constant inflow of customers so, if one fails and isn’t able to pay on time, potential problems are avoided. It also provides more time—and a financial cushion—to work things out with a troubled customer.

 

Slashing Unprofitable Customers

Often ignored by many business owners or managers is whether the best business decision may actually involve firing some of their worst customers. While this may seem like an illogical suggestion (particularly in a bad economy),having the wrong customers can be costing the pressure washing business in unexpected ways and holding it back from real success with the temptation of short term profits.

Are you worried about the customer going elsewhere? Sometimes that’s a good thing. Troubled or problem customers become problems for competitors.

Business Joys

Unfortunately, wringing money out of deadbeat customers has become a common issue in today’s slow-growing economy. In some cases the only option may be hiring a collection agency or going to court to collect, but many small business owners don’t like to go these routes.

Often it’s easier to take a proactive approach by avoiding the types of customer who usually spell trouble, staying alert to signs that long-time customers are having financial problems, and taking quick action when their payments are slowing down.

 

Tax Deductions for Debts

When all else fails and further collection efforts are fruitless, Uncle Sam, in the form of our tax laws, may have a solution: the bad debt deduction.

Under our tax rules, a business’s bad debt is defined as an account or note receivable that proves to be entirely or partially uncollectable despite collection efforts. Bad debts are written off as soon as they are determined because the pressure cleaning business does not expect future economic benefits, and it no longer remains an asset.

Of course, just because something may be labeled as a business bad debt doesn’t necessarily make it tax deductible. A bad debt deduction can be claimed only if the amount owed was included in the operation’s gross income. This is almost never the case for cash method businesses (that means most of us who report income when we receive it). Accrual method businesses, however, report income as it’s earned; if receivables have already been claimed as income, a bad debt deduction for uncollectible receivables is appropriate.

To ensure the pressure washing operation doesn’t miss out on a bad debt deduction, it must be able to show the debt is partially or totally worthless. What’s more, the tax law doesn’t allow a deduction for any part of a debt after the year in which it becomes totally worthless.

 

Avoiding Trouble

Minimizing a pressure cleaning operation’s financial risks—and bad debts—can be achieved by using various strategies ranging from initial credit checks to well-thought-out collection steps and parting ways with troubled customers. In the end, there is always the tax deduction for business bad debts.