Your Debt Recovery Experts

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.

Collecting Debt from Individuals

We are often asked, as a mercantile agency, how we approach collecting debt from individuals.

The Australian Competition and Consumer Commission (ACCC) and the Australian Securities and Investments Commission (ASIC) have produced a guideline. This guideline helps us to understand how the Commonwealth consumer protection laws apply to debt collectors, as well as in house collection departments within businesses. The guideline is online: https://www.accc.gov.au/publications/debt-collection-guideline-for-collectors-creditors

How may contact be made with a debtor?

If an individual owes you money and will not pay, you are entitled to contact them to ask for payment. You can contact them:

  • by phone
  • in writing (includes emailing, texting and social media contact)
  • in person.

 Am I restricted to when I can make contact?

Contact with a debtor must be made at reasonable hours, taking into account their circumstances and reasonable wishes. The following can be considered appropriate times and are the local times in the debtor’s state or territory:

  • phone contact between the hours of 7:30am–9:00pm on weekdays; and
  • 9:00am–9:00pm on weekends
  • No contact recommended on National public holidays

Face to face contact should be an option of last resort. Generally, face to face contact should only be made if reasonable attempts to contact a debtor by less intrusive means such as phone calls, emails or letters have failed, and face to face contact is considered appropriate and necessary. Reasonable hours of contact for face to face contact are:

  • 9:00am–9:00pm on weekdays and weekends
  • No contact recommended on National public holiday

How often can I make contact?

Debtors are entitled to be free from excessive communication or undue harassment. As a guide, contact should be limited (unless requested or agreed otherwise) to a maximum of 3 phone calls or letters per week (or 10 per month).

Generally, visits to the debtors home (or another agreed location) is not recommended and should only take place if there is no other way to make effective contact with the debtor, or if asked (or agreed) to a visit.

If repayment arrangements can be worked out over the phone or by letter, then face-to-face contact should not be necessary.

You must not:

  • threaten
  • harass
  • physically intimidate the debtor.

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.

Legal Action or Mercantile Agent?

When your business is not being paid for work that’s been completed or goods that have been delivered, do you think the next step is legal action?

Do the costs of potential legal action mean that you are reluctant to engage a Lawyer?

You don’t need to go to a Lawyer when you are in this situation. A mercantile agent will usually work on a commission only basis, meaning if you don’t get paid, you won’t get a bill. These days, the rates charged are competitive and with the right terms and conditions, you may even find that the commission costs can be claimed from your delinquent debtor.

A mercantile agent is an expert in recovering unpaid debt and specialises in talking with debtors and negotiating payment. If they can’t collect your debt, they will advise you of this and in conjunction with their Lawyers can advise you on whether legal action is recommended and the potential costs of this course of action.

At Kearley Lewis we have in house lawyers that we work closely with, and if we believe you need to speak with them we’ll let you know. Our Lawyers can work through more complex situations, including contract disputes and the breakdown of business partnerships. Read more about our in house Lawyer, Su-Ann Loh and her insights into debt recovery here.

If you would like to know more about how we could assist you, call us today on 03 9629 8777 or click here for more information on why you may wish to engage us.

 

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/

How can you be paid for providing the best education?>

Private education is a prestigious and well renowned institution of the Australian Education landscape. Parents have a sense of pride to know their children attend a private school. The sense of community and belonging is stronger. Unfortunately this form of education comes at a cost, and many parents are racking up unpaid debt for their children’s education.

Schools often keep students on, even if the parents aren’t meeting the tuition fees, because they do still receive funding from the government. It is financially a better position for the schools to have a child in the seat, and ethically it is better to give a child an education, than to deny them one due to money not being paid.

However what can happen is this situation becomes the norm and children go right through school without the parents paying the tuition fees. Why? Why don’t the schools demand payment, rattle the can at the parents and ask for the tuition fees they are rightly owed?

Firstly, schools can feel uncomfortable when it comes to applying the skills of debt collecting and some families genuinely do go through financial hardship. Secondly, it can be a delicate balancing act of not upsetting parents and students, versus being given what you are owed. Thirdly, there are parents who just do not listen to the schools when they ask to get paid. The parents have not had to pay before, why pay now?

This non-payment can lead to a reputation for the school not collecting fees. Unfortunately in some communities whilst there are some families facing genuine financial hardship, there are also individuals who will take advantage and seek to give their kids a free education at a private school. The unintended consequence of this can be that the school has to recoup on monies owed by increasing tuition fees for subsequent years, penalising future students for the behaviour of past students.

So what can you do?

Work with Kearley Lewis

  • We help you set up your collection procedures to ensure you have a credit policy in place and that you follow it.
  • A flat fee, yearly membership, gives you access to populate and send final notice letters to parents whenever you need them.
  • Kearley Lewis can handle collections for you and have the difficult conversations.
  • We do not collect a commission unless we collect your debt, and we offer extremely competitive rates for schools.
  • Speak to our legal team to help you out even further.

With our way of helping you collect debt, we build a relationship with you, and we build a relationship with the parents who owe you money, believe it or not. We are personable and dedicated to ensuring we don’t burn bridges with the work that we do. If families are facing financial hardship, we’ll discuss this with you.

If you’re interested in getting paid, and not being left in debt, then call us on 03 9629 8777, or drop us an email here at collect@kearlylewis.com.au

See what our clients say about us here.

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!