Your Debt Recovery Experts

Ensure your business is protected with customised terms and conditions

Here’s a question to ponder: does your business have customised terms and conditions?

If you are like many other business owners, the response is likely to be along the lines of “Umm, not sure”, or “we haven’t got around to that yet.” The truth is that updating T&Cs is one of those tasks businesses often put on the backburner – and it can be costly.

Even if they were drafted in recent years, it is important to know when you will next conduct a review to ensure any new legislation is factored in.

Sure, you may be running a successful business and be one of the lucky ones that have avoided payment disputes, but drafting or reviewing T&Cs is an important part of any business’s operations. It also provides peace of mind, so put it on your to-do list.

The case for Terms & Conditions

They can protect the thing that keeps most business owners awake at night – cash flow. Without them, businesses can end up spending a significant amount of time chasing unpaid debts and resolving disputes – or, worse still, writing off bad debts because nothing was agreed in writing.

They remove uncertainty if a dispute does occur. Yes, a handshake agreement with customers sounds nice, but in the absence of written terms and conditions you risk uncertainty and misunderstandings. Clear terms leave little wriggle room for customers who try to go back on their word.

Sound T&Cs are valuable for a business in the event of having to chase payments through a debt collection agency or when they need to engage a lawyer; they can also assist when seeking to recover costs.

Mutual benefits

It is important to note that terms and conditions protect both parties and clarify a trading relationship.

Remember, though, that terms should be customised for your business. Copying someone else’s T&Cs is risky because they may not have consulted a lawyer themselves. Each business will inevitability have different forces at play.

Help at hand

The good news is that we can help you. Our lawyers can review or prepare a customised set of terms and conditions, to improve your ability to successfully follow up on unpaid accounts.

Don’t forget – laws change, as does the way you trade with your customers. Check your T&Cs and sleep soundly!

Make the tough calls to clean up your end of financial year debtors’ ledger

Chasing overdue accounts as the end of financial year looms is a crucial business action – and one that some businesses put off or need a hand to address.

The truth is that debtor management is often one of the most difficult aspects of effective cash-flow management. So what can be done?

Issuing written reminders or SMSs to clients is an obvious step, and this move may be sufficient to prompt tardy but well-meaning businesses to pay their bills. However, making direct phone calls to habitual late payers is a far more effective way of finalising debts before the end of the financial year.

Business owners and credit departments are often reluctant, though, to make these tough calls, or they may feel they lack the experience to communicate with clients in a way that gets results. The upshot is that slow-paying  clients continue to receive extended credit, helping their cash flow and blocking yours.

With that in mind, here is a simple three-step guide to debt-collection calls.

  1. Be prepared

Make a plan and a commitment to targeting outstanding debts. Simply picking up the phone and cold calling a late payer is unlikely to work. Before calling, make sure you have all the relevant client information in front of you as this will give you confidence and prevents the client from dominating the call.

You want to avoid saying, “I’ll have to get back to you” because this delays debt recovery and provides another chance for debtors to avoid you.

  1. Know the facts

As part of your preparation for calls, gather all the necessary account details. This typically includes:

  • the amount owed
  • what they purchased
  • the payment due date
  • their terms of trade
  • where the invoices were sent
  • details of other outstanding invoices
  • their payment history.

When you are armed with this information, there is little wriggle room for debtors.

  1. Be ready for excuses

Habitual late payers often have a litany of reasons for not being able to pay. So be ready. Make a list of likely excuses and prepare appropriate responses. Here is an example of a possible call.

Customer: We have some cash-flow issues, so we won’t be able to pay this week.

You: I understand juggling cash flow can be challenging. How about you make a partial payment today, and we arrange a payment plan for the balance? How much would you be able to pay today?

What works with one client will not necessarily work with another. However, planning inevitably leads to better results.

 

Consider professional help

If this is still too daunting, an alternative is to engage debt recovery experts to make those calls for you, allowing you to get back to running your business. Such specialists have structured processes to follow and can stress to debtors that you will not let outstanding payments slide.

Remember, the squeaky wheel gets heard. Act now so you can prevent end-of-year payment blues.

 

Debt Recovery Tips | Managing Debts | Avoiding Bad Debts

debt collection tips

It can be tough for your business to balance customer relationships and the integrity of your brand, with chasing payment for your goods and services.

Here’s some tips from our team on avoiding and managing debt related issues.

Avoiding Bad Debts

  • Do your homework before offering credit to a new customer. An online credit check or even a Google search can raise a red flag.
  • Document agreements – have new customers sign a credit application which includes their ABN and ACN.
  • You don’t have to give someone credit – don’t compromise your own business to avoid an awkward conversation.
  • Send invoices promptly with accurate information, including purchase order details and convenient ways to make payments.
  • If your customer has an overdue invoice, follow it up quickly and consistently. Establishing a reputation as a firm but fair business can avoid future issues.

Managing Debts

  • Keep the lines of communication open. You can take a firm stance on your debt and still remain professional, human and compassionate.
  • If your customer asks for a payment extension, be specific about the terms and document it.
  • Don’t be put off by an awkward conversation. Many of us don’t like confrontation or discussing money. If it’s too hard to manage, we can help.
  • Weigh up the time being spent on chasing debts against the value of your time. Outsourcing may be the obvious answer.
  • Keep it confidential. You don’t want your business developing a reputation as indiscreet.

Slow Paying Debtors | A Tail From The Horse’s Mouth

slow paying debtors

Slow Paying Debtors

Careers in the veterinary field attract those of us passionate about animal welfare.  You might assume that they would not have issues with slow paying debtors?

When Chris Wain Equine Veterinary Services in Queensland reviewed their cash flow, they were surprised to see how many invoices were going unpaid.

April Wain, Veterinary Nurse, said she identified two issues:

  • When they were called out, the welfare of the animal was the first priority, not thinking about the likelihood of a customer not paying them
  • Individually, unpaid invoices did not justify taking further action, typically they could be $300 to $600, however a number of invoices were not being paid, so it was impacting their cash flow

The Solution:

April needed a solution that would address the issue of non-payment, whilst being affordable so as not to cut into her margins. She also wanted to work with a team who were focused on results, but not at the expense of her reputation, brand or customer relationships.

April now has a membership with Kearley Lewis, whereby for $180 a year, she has access to unlimited debt collection services. She can utilise the services whenever she needs to, and only pays a commission when she gets paid.

Not only that, her terms and conditions have also been updated, so that the commission costs Kearley Lewis charges are paid by her customers when their payments are made.

Minimum of cost, margins maintained. Simple.

What does April say?

Kearley Lewis has proven to be an organisation that take pride in their interactions with clients and debtors alike. They have provided us with a personal service that takes into account the idiosyncrasies of the horse veterinary service industry. Being able to use their expertise to help us concentrate our efforts on providing the service that we pride ourselves on has been of immense benefit.

So far Kearley Lewis has been almost 100% successful in retrieving outstanding amounts, some as old as 12 months.

Chasing for payment? Recognise these characters?

‘Our Favourites’

We all love our customers who pay to terms, we don’t need to remind them, payment comes through before or on the due date and we all want more of these customers, these are our favourites.

‘The Busy Guys’

We’ve all learnt to manage the customers who ‘thought they’d paid’, ‘meant to pay’ or ‘forgot to pay’, these guys are busy people, and we know they’ll pay. We schedule our phone calls every month, following the same process and the arrangement works, we know the routine.

‘The Delayers’

Yes, they’re the ones, they say they didn’t receive an invoice or they want a copy of a delivery docket, but they only tell you when chased for payment. We manage these guys like the busy guys, we know the routine!

‘The Jugglers’

Then we’ve got our customers who can have cash flow issues. These guys intend to pay and they take some chasing, the timing of payment varies but generally speaking we get there in the end. But sometimes these guys are too embarrassed to let you know the issues they have. Let’s face it, juggling cash flow happens to the best of us, but sometimes these guys can go silent, and when payments get too far overdue, the situation becomes awkward, for everyone. This is when we wish someone else would deal with the matter, right?

‘The Avoiders’

Another character we wish someone else would take off our hands is the ‘I avoid paying’ or ‘I won’t pay in full’ type of character. These are the guys you reflect upon and wish you had asked for payment up front or not been so keen to accept their urgent request. It may have been the first time you supplied to them and you were keen to take on a new customer. The excitement of a new account has now turned to regret at giving them credit terms.

We’re here to help

Don’t forget, we’re here to make it easier to reopen lines of communication with cash flow juggling customers, even if sometimes it means entering into a payment arrangement on your behalf.

For customers who are refusing to pay, we can have the difficult conversations so you don’t have to. We are used to managing these types of characters and we can have success where you may not have.

Debts aren’t just bad for business, they’re stressful.

Debtor Management & cash flow solutions

Cash flow is the most important part of any business. Without it you simply cannot operate. One of the biggest hurdles with debtor management is ensuring your debtors pay you in a timely manner.

Cash Flow Finance, or Invoice Finance as it is also known, can speed up the cash flow of a business if it sells to other businesses.

How it works

Invoice finance is where a business’s accounts receivable ledger, (or part thereof) can be used as collateral against obtaining finance. The debtors ledger is sent to the finance company and they can remit funds to the business. The amount of the ledger which is financed varies depending on the debtors involved. When debtors begin paying the invoices, this repays the finance company.

Benefits of the solution

Kearley Lewis works with a handful of reputable invoice finance providers. The benefits of using an invoice finance company are:

·         You speed up your cash flow and get paid more quickly by your debtors

·         You can reduce your chances of having bad debts

·         You can obtain finance without providing real estate as security

·         Your costs for finance can be factored into your pricing

·         You can obtain debtor insurance as part of your invoice finance package

·         You get access to your funds immediately, while your competition wait until their debtors pay

Contact us

If your debtors are putting pressure on your cash flow and you’d like to talk about your potential invoice finance options, call Julie Lamers on 0406 744842.

Interview with dispute resolution Lawyer, Su-Ann Loh

Su-Ann Loh is the Director of Dispute Resolution at Lewis Holdway Lawyers & lawyer to Kearley Lewis, mercantile agency.

In this interview, Su-Ann shares the issues that she most frequently comes across, as well as her tips on how to avoid having debt collection issues.

Su-Ann works across both organisations within the Lewis Holdway community, and therefore ensures that all files and processes are legally compliant and have oversight from a lawyer.  If files ever need to be escalated to Su-Ann, she will already have had intimate knowledge of the file.

“It means as a mercantile agency, Kearley Lewis can provide clients with a full service, and they can have confidence that our legal team has oversight of the debt collection process, thereby maximising collection rates.”

Su-Ann has been working in the Lewis Holdway Community for 10 years this July.

So, what are the most common issues that come across Su-Ann’s desk?

The most common issue is that there are still many businesses who trade without having written terms and conditions. Su-Ann says:

“The easiest answer to this problem is to have a customised set of terms and conditions and a contract of trade drafted up for your business. I explain it to clients like this, it may cost a little bit to see the doctor for preventative care, but I can assure you that you will be grateful for that input early on, because you don’t have as much control of the situation when you’re on the operating table.

The difference in cost between having your terms and conditions drafted, versus the issue of collection, especially if it is an issue that is referred to a lawyer, is not insignificant.”

Su-Ann feels that service providers and the suppliers of non-tangible products, need her expertise more. Why is this?

“The service provided is not always quantifiable, and because of that, with our modern times we are seeing a new generation of consumers, who don’t necessarily see the value in the service being provided. Putting a paper trail in place crystallises the relationship and reinforces the value of the service you undertake.”

Are there any industries that you get frequently involved in and why?

“We have a range of industries that we work with frequently. Many of our clients are in the construction industry, recruitment, wholesalers across a number of industries and we also do an increasing amount of work with service suppliers.

Any business that sells on credit terms may have instances where the relationship doesn’t go smoothly, and this is where we can assist.”

What services do you offer that our readers may not know about?

“The service that a number of our larger clients utilise us for is having Kearley Lewis as an extension to their accounts receivable area.  Each month they pass across their invoices that are past a certain age, and the team at Kearley Lewis then undertakes collections on their behalf.  If a file does have to go to our legal team, we are in effect the client’s lawyers as we work so closely with Kearley Lewis, who in turn works closely with our clients.

This outsourcing is a cost-effective way for clients to have support for their collections and access to lawyers when they need them, rather than having these resources permanently in their business.”

So, what are Su-Ann’s top tips to avoid having debt collection issues?
  • Have a really good internal debt collection process, and stick to your payment terms.
  • Have clearly written terms of trade, which appear more than once in your paper trail (for example, on the back of your invoices as well as your credit application).
  • Do credit checks on new clients, with permission. This can be undertaken through the Kearley Lewis website.
  • If you don’t feel comfortable giving a particular client credit terms, consider taking part payment, ask for payment up front or cash on delivery.
  • Know your customer & pay attention to WHO is paying the bills. Your debtor can change entities and it can affect you, without you even knowing it has occurred.
Some businesses may be reluctant to use Kearley Lewis’s services as they have a perception it could be expensive. 
What would you say to businesses such as this?

“Perception is different to reality. Understand what is real by doing your research on the service offering of Kearley Lewis and, by all means, make a comparison with other mercantile agencies. Then measure this by undertaking a commercial cost benefit analysis and comparing the cost of signing up as a member of Kearley Lewis for one year, against the losses your business could stand to suffer if collection isn’t tightened. Those losses are not just referrable to the unpaid invoice, but also the time lost in rendering the service or the product and the internal cost of your collection. There is also the matter of reputational loss for your business in the industry and among it’s customer base.

I would also encourage businesses to speak with the General Manager of Kearley Lewis and get a sense of the file handler, who will ultimately manage your file for you; you will find that Kearley Lewis matches the file handler and their industry knowledge to relevant clients.

More often than not, the clients who have the most painful experience with debt collection are the ones who have left it too late or did not take precaution in their trading relationship with certain belligerent payers. My recommendation is not to let a one-off experience take away the benefit of having a mercantile agency like Kearley Lewis work alongside you in helping your business minimise its losses from bad debts.”

If your business would like assistance or support with collections, contact us on 03 9629 8777 or read more below:
https://www.kearleylewis.com.au/about/the-role-of-a-commercial-debt-collection-agency/

The 12 days of Christmas Cash Flow

We may not want to be reminded, but Christmas is just around the corner and we need to think about what this means for our cash flow.

Whilst many SMEs will be at their busiest, the holiday period is also a time when cash flow can be at its tightest.

It is worth doing some work now so that your business is in good shape over the festive season.

The 12 days of Christmas Cash Flow:

On the first day of Christmas …
Review when you will be invoicing leading into the holiday period and consider when other businesses will be closing, so you can be paid on time

On the second day of Christmas …
Review which of your customers have a habit of paying late and ensure they are reminded in advance of when payment is due

On the third day of Christmas …
Consider whether you need to refer any unpaid invoices or potential bad debts to a commercial debt collector, so they can work on you being paid before Christmas

On the fourth day of Christmas …
Update your cash flow projections to anticipate any shortfalls

On the fifth day of Christmas …
Consider which customers need to pay you before you supply them further

On the sixth day of Christmas …
January can be challenging so follow up invoices before your customers and their accounts departments go on holiday

On the seventh day of Christmas …
Resolve any disputed invoices now; provide your customers with supporting documentation so that invoices can be approved for payment

On the eighth day of Christmas …
Whilst you are really busy, be sure to follow your credit policy.  Having a signed credit application form with ABN for new customers is always recommended

On the ninth day of Christmas …
Review when your suppliers need to be paid and utilise payment terms or ask for a discount for paying early

On the tenth day of Christmas …
Beware of suppliers chasing for payments if they want you to pay to a different bank account or are threatening to stop supply over this period

On the eleventh day of Christmas …
Consider offering a discount or incentive to be paid before the new year

On the twelfth day of Christmas …
Sit back, relax and enjoy the festive season

Debt Collection: Top 3 Tips

Debt Collection: Top 3 Tips

Debt Collection: Top 3 Tips

 

1. Know your customer

Always ask new customers for a signed credit application, and ensure they have provided you with an ABN. Undertake a credit check and cross check the details to the credit application. You want to make sure you know who you are dealing with and avoid extending credit to the wrong customer.

2. Accurate and prompt invoicing

If you invoice promptly and all the information is accurate (including a reference to the purchase order) it will make it easier for your customer to approve and pay your invoice.  Attaching supporting documentation will prevent your customer from requesting any further information from you. Do everything you can to prevent unnecessary delays.

3. Collect payment from your customers promptly

Follow your credit policy and ensure you chase your debts promptly.  Gain the reputation with your customers that you will follow up payment. There’s nothing wrong with calling customers before the due date to check that payment will be made.

 

If you have some challenging customers and would rather not make the difficult calls, Kearley Lewis would be happy to assist you with your debt collection needs. 

It may be that you are spending too much time chasing customers and you need to focus on other areas of your business.  In which case, let us undertake your debt collection activities. 

We source and retain the best people to work with our clients and our people do everything they can to protect every client’s brand and reputation.

All our relationships are important to us and we strive to ensure that the values we demonstrate support and promote positively our clients, our staff and our business partners.

Call us today on 03 9629 8777.

Debt recovery: keep your cash flow healthy

Debt recovery: keep your cash flow healthy

We’re nearing the end of the first quarter of this financial year, and many of our business customers may have recently reviewed their debt recovery processes and procedures, to ensure they maintain a healthy cash flow and minimise potential bad debts throughout this year.

When your business is winning new business, it’s great for your P&L but if you don’t follow up your invoices and get paid, it’s not great for your cash flow.

Do you need to review your credit terms or invoice frequency?

You may or may not have standard credit terms that you offer your customers.  How promptly do your customers pay against their credit terms and does this payment cycle work for the cash flow of your business?

It may be that you need to think about having shorter credit terms so that you are paid more quickly.

Similarly, you may also wish to look at how frequently you invoice. If you invoice monthly, would it be beneficial to your business to invoice weekly? The sooner you invoice for the goods or services you have provided, the sooner you will get paid.

Follow up your sales invoices

Follow up your customers by calling them to confirm delivery or satisfaction with the goods or services you have provided; if there are any reasons that could give rise to a dispute, find out early and not when payment is overdue.  The sooner you resolve any issues, the sooner you will recover the debt.

Stay close to your customers, ensure they are aware of your terms of trade and from the start, ensure they know that you chase up your invoices promptly. Those who shout loudest get paid first!

Do you need to review your terms of trade?

Do you have a clause in your terms & conditions that will allow you to recover your debt recovery costs back from your debtor in the unlikely event that they do not pay?

If you do incur costs, you want peace of mind that you can recover these as well as the debt.

There are many clauses that can assist in the speedy recovery of your debts, they include some of the following:

  • Caveat / charging clause
  • Jurisdiction clause
  • Cost clause
  • PPS (Personal Property Security)

 

Kearley Lewis specialises in providing ‘business to business’ debt recovery services directly to Businesses.  They have an in-house Law firm, Lewis Holdway Lawyers which provides commercial legal services and experienced Law Clerks undertaking their collection services.

Debt collection tips for SMEs

debt collection tips

Debt collection tips for SMEs – position your business to get paid more quickly

Whilst some business owners are reluctant to chase late payers for fear of losing their business relationships, it’s becoming increasingly important as we see evidence of larger businesses choosing to extend the time they take to pay their suppliers.

The recovery of business debt can be frustrating, time consuming and often unsuccessful so having a good credit controller and utilising the services of a reputable debt collection agency can be invaluable for your business cash flow.

Below are some helpful credit control tips, and whilst not exhaustive, may assist if you are reviewing your own practices.

Set a credit management policy

In determining how vigorous a risk regime your business needs to adopt, it is perhaps prudent to relate the approach you take to your profit margin.

Businesses that have a low gross profit margin cannot afford significant bad debts, and thus they should consider having a more vigorous risk assessment regime than a business with high gross profit margins. It goes without saying that no business wants bad debts, however in setting up your credit management policy, being aware of how much tolerance your business can take should provide you with a good starting point.

Partnering with a trusted debt collection agency who has access to in house lawyers is often a cost effective way to leverage some assistance if you ever need it, and if your invoices are going too far overdue.

Establishing a relationship before you need external assistance is crucial in sourcing the right partner for your business.  Make sure you take the time to engage with a partner who will work with you to preserve your brand and reputation and who is prepared to take the time to understand your business.  You want to make sure anyone who is contacting your customers is not damaging these relationships, particularly if there is potential for more business.

Setting up new customers

Suggestions for assessing new customers:

  • Always have a signed credit application from your customer prior to setting up a new account, ensuring they have provided an ABN
  • Undertake a credit check, cross checking details to the credit application
  • Allocate a credit limit (if you are happy to extend credit)

Undertaking a credit check may not necessarily prevent you from giving credit to a customer who is slow to pay, however it will mean that you’ll avoid giving credit to a debtor who has previously defaulted.

Decide what steps should be satisfied in order for a customer to receive credit terms, as credit should not be automatic. Don’t be afraid to ask for cash payments to start with, and it is not uncommon to ask for trade references and/or personal guarantees.

Set a credit limit for each new customer and check regularly for adherence to this.  If a customer isn’t paying to terms, ask for payment before new goods or services are supplied.

Know your Debtors

Make sure your invoicing is accurate and make sure it is in line with the customer’s order, including delivery details.

Follow up your customers by calling them to confirm delivery or satisfaction with the goods or services you have provided; if there are any reasons that could give rise to a dispute, find out early and not when payment is overdue.

Get to know who pays the bills – building rapport with the person who pays the invoices could be invaluable and in a larger organisation they may not even be aware of the product or service you have provided.

Collection procedures

Consider categorising your customers into good, average and ‘challenging’, and set a collection policy for each customer type.

Phoning larger customers before the due date can be a way of ensuring payment will be made on time.

Be diligent in your collections, chase overdue payments within a week of them being due. Prioritise your collection activity, chasing larger balances first.

Know your aged debtors listing intimately and follow your credit management policy regarding standard letters, calls and referrals to your debt collection agency.

Can you recover costs?

Often terms of trade will stipulate interest charges will be incurred for late payment, however do you have a clause that will allow you to recover your debt collection costs in the unlikely event that a debtor does not pay?

Often reputable debt collection agencies will ask their in house lawyers to review your terms and conditions free of charge, which is recommended so your terms of trade are fully documented up front.

Proactively manage your credit policy

Consider having a regular review to identify problem accounts and define courses of action.

Make sure your sales team are involved in your reviews so they can assist in managing the accounts and setting expectations with customers.  Ensure they know the credit limits that are in place, and seek their assistance in getting paid, particularly if there are new orders coming in.

It’s not surprising how many debtors will pay when they want more goods or services provided, or how motivated your sales team will be to help you when they want those new sales!