If you supply a trade or service on credit, such as 7, 14 or 30 day payment terms, you need an effective contract to protect yourself from disputes and people who don't pay or pay late.
In the past 10 years of running BCA Debt we have observed 5 common mistakes businesses make! With just changing these 5 mistakes, you can prevent your customers from becoming debtors and increase your cash flow.
One of the common mistakes is not having good Terms and Conditions.
Did you know that your 'Terms and Conditions' should be the single most important document you create for your business? The words Terms and Conditions should bring to your attention just how important these documents are, they can set the direction of any business deal you enter, be it good or bad.
Your Terms and Conditions are the rules of your business.
If you have ever experienced any of the following in your business, then it may be time to assess your Terms and Conditions
Many businesses hope their bookkeeper, admin staff or accountant will fix these problems for them, but they are not the experts in this field.
The Blue Print
Your Terms and Conditions are the blue print of how your business operates, you, your staff and customers should intimately understand every aspect of them, and this is how you prevent deals from going bad.
The reason I say this is because the majority of problems we have experienced with disputes and conflicts between a business and their customer is because there is not a clear understanding of each other’s responsibility when entering into a business deal. Often what happens is neither party is clear on the expectations within the job because the Terms and Conditions have not been explained or are simply non-existent.
Daunting Solicitor Jargon
We understand that creating these documents is a very daunting proposition because most of the Terms and Conditions we have seen are in solicitor jargon, in font you can’t read and feel as if they have sinister overtones.
All this makes it difficult to work out what is best for your business. These Documents are Important so don’t let all the jargon, small writing and deception put you off, with little effort we can help you produce user-friendly Terms and Conditions for your business.
Put these together with your payment requirement and you have the beginnings of creating a good document that helps prevent customers from becoming debtors.
Less Disputes - Who wouldn't want that? We know that once a client has good Terms and Conditions in place they are less likely to experience disputes and nonpayment.
We offer this programs for individual businesses, it fully covers the credit management Policies, Terms and Conditions and much more. It will assist you in preventing your customers from becoming debtors and help to solve the problems listed above.
The Credit Management Toolbox
The credit management toolbox is a comprehensive suite of documents and policies custom designed for your individual business. If you supply a trade or service on credit, such as 7, 14 or 30 day payment terms, you need an effective contract to protect yourself from disputes and people who don't pay or pay late!
The credit Toolbox is for smart business people who want to move to the next level of professionalism and who are sick of customer disputes. It is for businesses that don't have any formal documentation in place and wish to put in place best practices.
We have seen just about every trick in the book.
That is the reason why we have produced a Suite of documents for the Credit Management Toolbox.
At BCA Debt, many of the debts that come to us could have simply been avoided because businesses don't have the processes in place that we are offering in this Toolbox.
Why Risk loss of Income?
Why risk any further loss of income and more financial pain, you could be missing the essential elements all successful businesses use to safeguard their finances?
The really bad news is that your late payers are using your money while you suffer cash flow problems let me help you create simple policies that your staff are empowered to use when quoting and accepting a new customer.
let us help you be clear on your terms and conditions, written in plain English and easily understood by you and your customers, including clearly defined dispute resolution processes.
Let's include clauses that puts the cost of debt collection back onto the customer if they fail to pay you.
If you want to know the honest truth of how to prevent debts, the secret is in the use of these proven strategies that
To move to the next level of business professionalism and implement your debt prevention strategy simply fill out the purchase form for the Credit Management Toolbox now and start managing your business how other successful businesses do it.we and many of our clients have used to improve our business.
In 2015 we were approached by an earthmoving company that had done some work for a builder. The total value of the work done was just under $6,500.
This debt was going to be difficult to collect right from the start as the earthmover:
These pretty much represent the most common mistakes made by businesses providing credit to others. As it turns out, this particular builder was known to us due to past dealings with other clients. We did manage to collect $1500 of the due debt but, because of the lack of paperwork, there was little the builder could do in the way of legal action to recover the money due.
Key lessons from this experience that all business owners should heed:
If you have a customer who is unwilling or unable to meet your conditions, then simply have them pay cash when the work is done (if not before). Unless finance is your core business, you shouldn’t put your business at risk by providing credit to those who may not be able to honour their end of the deal.
We have recently set up a specialist BCA Debt division that helps clients set up systems and reduce the risk or impact of debtor failure. To see whether your business is at risk from such issues, we invite you to make use of our new free Credit Risk Assessment tool. It only takes two minutes and gives you a clear indication of your level of risk and steps you can take to reduce this. Pretty good investment of two minutes of your time don’t you think?
Due to the nature of our business, we often have to tell ‘bad luck’ stories of clients to help prevent others suffering the same fate. Today is a good news story though. It has nothing to do with luck and everything to do with preparation.
Our client was (still is) a steel fabricator, providing custom steel work for their clients. It’s specialist work and, once a project is made, it pretty much can’t be used anywhere else, even reclaiming the work done is of little value to the fabricator.
Fortunately, they recognised the risks of providing credit and approached us to help them reduce that risk. We assessed their business and helped them put protocols and systems in place that gave them the highest level of protection possible. This included customised, lawyer reviewed Terms and Conditions that every customer has to agree to before being allowed credit with the company.
Not long after putting this in place, the fabricator had a customer debt of almost $3,700 become overdue beyond their terms. They referred the debt to us and, because they had followed the processes we had put in place with them, we were able to collect the full amount within one week.
The debtor was unable to use the usual ‘excuses’ and ‘tactics’ that we see debtors try and use every day, simply because the Terms and Conditions and the processes our client had used rendered such excuses and tactics as useless.
Though our client could easily have said, ‘We’ll be okay, we don’t need Terms and Conditions or processes in place,’ the investment that they made in putting them in place was more than paid back the very first time they had to apply it.
The same system that we put in place for this client is now the backbone of our brand new specialist BCA Debt division. The system has different levels of application that vary depending on the needs and size of the business.
You can contact our BCA Debt specialists via email or phone (1300 308 669) for more information or, alternatively, you can assess your own credit risk with our new two minute Credit Risk Assessment Tool. The tool is free to use and gives you a clear indication of the current level of credit risk your business is exposed to and measures you can take to reduce that risk for minimal cost.
It’s always pleasing when a client places a big order but once the goods are delivered and the sale becomes a debt, that big order can turn into a big problem.
Such was the case for a winery that contacted us to pursue a client debt of more than $170,000. We reacted pretty quickly and managed to collect a little over $30,000 but, after some time the debtor wound up the business, making all remaining debts uncollectible.
This put a massive dent in the winery’s cash flow for some time and put the business at serious risk. That risk could have been reduced though, or perhaps even avoided altogether.
Measures the winery could have taken to reduce their risk included: making proper credit checks (as opposed to ‘credit reference checks’) on the business prior to allowing credit; setting a credit limit that was more in keeping with the size of the business; ensuring a Director’s guarantee was in place to secure the debt; registering the debt on the Personal Property Securities Register (it only costs $6.80!), and; having protocols in place so that they responded earlier when the debt became overdue.
Each one of these steps offers a different layer of protection but none of these had been put in place. You may or may not have debtors of $170,000 or more but any debt is worth protecting. After all, it’s your money in someone else’s account.
We have recently set up a specialist BCA Debt division that helps clients set up these systems and reduce the risk or impact of debtor failure. To see whether your business is at risk from such issues, we invite you to make use of our new free Credit Risk Assessment tool. It only takes two minutes and gives you a clear indication of your level of risk and steps you can take to reduce this. Pretty good investment of two minutes of your time don’t you think?
Recently we had a client ring with an interesting question which I would like to share. This client runs an engineering company and had done some modifications on a vehicle. The customer had some issues with the modifications.
The client rectified these immediately then had the changes approved by the licencing department. Our client made these changes at their cost, however, the customer had made further request for additional work to be done on the car that were not part of the original design issues.
When the work had all been completed the client sent the bill for the additional work and his customer has now refused to pay, stating that the agreement was that the client would rectify the issue at their own costs.
They are now in dispute over the additional work and costs. Lucky for our client the vehicle is still in his possession and our suggestion was they enforce a repairer’s lien on the vehicle. A repairer’s lien entitles you to keep possession of the vehicle until the debt is paid, a lien can only arise if work is done on the vehicle and is in the repairer’s possession.
There are some important factors involved in enforcing a lien.
1. You must have acquired possession of the vehicle with the owner’s permission
2. Lien can only exist for the work that has been performed on the vehicle at that time
3. If the vehicle leaves your possession you lose the authority to enforce the lien
4. If the vehicle is subject to a finance agreement the contract may inhibit the enforcement of a lien.
We had a client asking if they could put a caveat on their debtor’s house as a means of recouping their debt. I did some investigating into this for them and found that placing a caveat on someone’s house is not a simple process.
Firstly the person you are doing the work for must be the same person who owns the house and if there are joint owners both must agree to the caveat. Not only that, the work must have been done on the property, meaning there must be caveatable interest in the land.
Interests that do not give you a caveatable interest over the land are debts that are not involved with the land or have any other contractual rights in that particular piece of land. This means that if you did a job on someone’s car or sold them items through a store you cannot put a caveat over your debtor’s property.
The best method of protecting your interest is through the PPSR (personal property security registry). However, this must be done prior to the sale and your customer must sign a trade agreement with you, giving you permission to pass their information onto the PPS register.
You cannot do it after you have sold them the products. It’s too late then, it like closing the gate after the horse has bolted.
When it comes to a caveat the item owing must be part of the land and directly related to the owner of the property.
The following is an exert from the legal aid website which outlines what a caveat is and the implications of using this as a means to secure a debt payment. Using a caveat is not a simple way to complete the debt collection process.
"What is a caveat?
A caveat is a notice registered on a certificate of title (a "registered interest"), that prevents dealings (eg buying, selling, registering a mortgage) with the land. A person who registers a caveat is known as a "caveator".
A caveat acts as:
• a warning of an equitable interest in land
• a statutory injunction.
A caveat can only be used to protect an interest in the land. It does not give a proprietary interest in land.
To lodge a caveat, the caveator (the person who takes out the caveat) must have a caveatable interest in the land, in other words, an estate or interest in the land. The types of caveatable interests are varied and complex. Generally, a claim should arise through a dealing with the registered proprietor.
You should get legal advice before lodging a caveat. There are costs consequences. You can now lodge a caveat (improper dealings) with Landgate to help reduce the risk if improper dealings with your property. Once lodged this caveat will stop the registration of any instruments such as transfers, mortgages or leases that would usually need to be signed by the owner. If there is more than one owner, all owners of the property must want to lodge this caveat.
If you are an owner who has a mortgaged property you should check your mortgage terms and contact your lender before lodging a caveat (improper dealings) as you may not be able to do so without the consent of your lender.
Fees are payable to lodge a caveat.
How can a caveat restrict dealings with land?
A caveat can act as an injunction to prevent the Registrar of Titles from registering any instrument either absolutely, or until after notice of the intended registration or dealing be given caveator, or unless such instrument be expressed to be subject to the claim of the caveator.
Always seek legal advice before registering a caveat over another person's property.
If you have been served with a notice from the Registrar of Titles about a caveat you have lodged you require urgent legal advice, as time limits to respond are short.
How does the registered proprietor know about the caveat?
The Registrar of Titles (at Landgate) has to give notice to the registered proprietor that a caveat has been lodged against their property.
What if someone gets a caveat without a reasonable reason?
If a caveat is lodged without reasonable cause, the Supreme Court can order payment of compensation for damage caused. Get legal advice.
How can a caveat be removed?
A caveat can be withdrawn at any time by the person who lodged it (the caveator).
The registered proprietor, (or any person claiming under an instrument signed by the registered proprietor) can apply to court for the removal of the caveat.
In cases where it is clear that the caveator has no caveatable interest in the land, the registered proprietor may apply to the Registrar of Titles (at Landgate) to remove the caveat.
There are different requirements for the lodging and removal of a caveat (improper) dealings. See the Landgate website for more information."
Here at BCA debt we're often asked to collect debts on behalf of tradespeople. Unfortunately it's an area that is fraught with misunderstandings that often leave the tradespeople out of pocket.
In one such case we had recently, a plumber was asked to quote on two jobs at a property that was being renovated. The plumber quoted on the jobs and these were accepted by the client.
When the plumber completed the first job and invoiced the client, she refused to pay, saying that she had wanted the other job to be done first as she had tilers who were waiting for that job to be completed.
Though there was no problem with the work the plumber had actually done, her justification for not paying was that she had to get another plumber to complete the second job and that the effects on her renovation schedule had cost her money.
Thus the plumber did not receive payment for the work done. Even though he referred the debt to BCA Debt for collection we were unable to ‘enforce’ the debt as they had only made verbal agreements about the works to be done.
Misunderstandings are natural but the consequences don’t have to be left at the mercy of the integrity of the parties involved. In this case, if the plumber had had proper procedures in place and clear Terms and Conditions that the client agreed to before the work proceeded, he (and we) would have been in a better position to collect his debts.
The sad part of this story is that it doesn’t take a lot of effort or cost a lot to set up clear rules and protect your interests as a creditor.
We have recently set up a BCA Debt assessment tool that helps you determine if your interests are currently well protected and then provides recommendations on actions you can take to reduce your risk. The tool is free to use and takes less than two minutes to complete. Whether you are a tradie or not, if you are providing goods or services on credit, we strongly advise that you assess your own credit risk and follow the recommendations given. It could stop your money from going down the drain.
Time and time again we see situations where a debt has been left for so long that the client and customer relationship has broken down. Usually this happens because someone is not dealing with complaints or customer service issues and because of this disputes and problems are left to fester.
Often many thousands of dollars are left sitting on accounts ledgers because the business does not have adequate complaint policies in place.
One of the biggest problems is when the dissatisfied customer has to employ another service provider to fix issues that have not been rectified, this is when it becomes really difficult as a debt collector to convince the customer to pay, as they have now incurred double the costs.
Dispute resolution is one of the main issues we deal with at our agency and honestly a good percentage of debts could have been avoided. A simple paragraph in your documentation or a process customers can follow on your website regarding complaints resolution is all that is needed.
Both parties have the rights when it comes to disputes, there are to main areas that cover small businesses, the first is the Australian Consumer Law (ACL) and the Competition and Consumer Act 2010 (CCA) (formerly the Trade Practices Act 1974). Further to these the Australian Competition and Consumer Commission (ACCC) is the national government agency which promotes compliance with the CCA and, where necessary, takes legal action against businesses that break the law.
If you are a business owner the ACL automatically provides your customers with a basic set of consumer guarantees when they purchase your goods or services.
Your customers have a right to have a problem with a product or service remedied if it fails to meet the guarantee.
Further to this you have a right to remedy a problem with a product or service, this means a customer cannot refuse your offer to remedy a problem and employ another person for the remedy.
Having said this, policies on time frames and documentation when a job has been finalised are imperative to protect both you and your customers. Having documentation in place for your customers to sign when a job is completed that they are satisfied with the job provided makes it clear for both you and your customer that there is closure at the end of the job. In the event your customer is not happy with the job, you also need a specified time frame and form for your customer to fill out and then an outline of how you will remedy the problem.
By taking these simple steps before any disputes result and save you a great deal of pain in the long run.
If your staff understand the process then it becomes a simple process to follow to ensure customer satisfaction and your customer relationship are not left to fester but allowed to flourish as they should.
Please find a here an excellent document that explains the rights and obligations of both parties and an example of a disputes resolution form you can use is your organisation.
I am always on the lookout for good resource to help people with their finances and businesses in general and just lately I have found myself repeatedly going to a government website called Money Smart. (https://www.moneysmart.gov.au/)
The website is not actually business focused it is more for consumers, but it has so much great information that I feel it could benefit everyone.
I hope that I am not telling you to suck eggs and that you already know about this site, but it’s really good. There is tones of information about borrowing money and managing finances, there are also some excellent calculators for budgeting, retirement planning and of course managing debt.
It is geared up for all ages, and the budgeting planner is awesome, I also did the retirement plan to see what was in it. It’s very good and it made me think about a lot of things. It’s probably its worth doing at any age.There is plenty of fantastic information on obtaining credit and borrowing money and if you haven’t obtained a loan before there is information about the National Credit Act and plenty of links to more info.
There is also information about what to do if you are having trouble with paying your debts and how to handle debt collectors.
As you go through the website and it explains the different aspects of managing your money it gives excellent case studies that are easy to read and understand.
I believe this site is a must read for young people, especially those wanting to borrow money to buy a car or obtain a credit card.
The budgeting should be taught in school, in fact I think the whole website should be part of the curriculum.
The amount of young people we see in our business who have car loans and credit card debt they cannot afford is unbelievable, some simple training on budgeting could have saved them a lot of pain.