Nichola Caddy

Nichola Caddy

Over the years this has been a contentious issue here at BCA Debt.  The reason why is because when a business charges a customer for a missed appointment, they usually refuse to pay and it ends up in all sorts of arguments.

Understandably if you are running a business and you set aside time for a customer or patient for a consultation and they do not turn up you have lost time and money. 

However putting the boot on the other foot, a customer or patient who does not show up for an appointment has not received the services but is now being charged.  They tend to become quite irate at the business for charging them and saying that a debt is due for collection.

The only way to solve this problem is to be very clear with all customers when they make appointments that you have a policy on charging for missed appointments.  This policy then needs to be a clause in your terms and conditions and should outline exactly what the procedure is if a customer misses an appointment.

According to the Department of Commerce (Fair Trading) their directive is that customers must be told at the time of booking the appointment they will be charged if they miss it and what the cost will be.  They also state that it should be a fair and reasonable fee along with giving the customer the opportunity to make another appointment without being charged.

Make it policy in your business that when an appointment is made that your staff speak directly to the person whom the appointment is for, giving them the information verbally, then ensuring they understand.

It is also very important the on registration all customers have a copy of your terms and conditions and that this is signed.

Things to be aware of:

  1. If your business makes appointments on behalf of customers from a referral, ensure that you speak directly to the customer and explain the policy.
  2. When sending sms reminders, ensure that the sms has clear instructions on how to confirm the appointment and that there is a missed appointment policy.
  3. Check to see if your sms system has the facility for customers to reply to it.  If not this can be very confusing.  Ensure step 2 is in place.
  4. It is possibly a better policy to have a representative to call customers the day before to confirm, particularly if your sms facility has no reply capability.

Let’s face it one of the first things you think of when you go into business is not who is going to follow up on late payers and manage the list of debtors. The reality is that this role is largely one of the most important and usually ends up being the last thing on the list and mostly ends up on the list because there is a problem.

It may not be so bad if you only have a few companies that are late payers, but I know in my business that is not the case.

Bizarrely it is not our debt collection client but the work we do on behalf of other debt collectors that are the late payers. We have a dedicated person who’s role is to follow up on these clients. It is tedious that we have to have a dedicated person doing this role, why can’t our clients just pay on time, one thing I do know is that without that person our cash flow would severely suffer.

We all know how important cash flow is, my dear dad used to always say to me ‘Nichola cash flow is king’.

It makes me sad when we get clients who are suffering from cash flow issues, which is compounded by high volume clients paying late. The problem is we get too emotionally involved when it comes to asking our big clients for the money, we get scared we will lose them as a client.

The following up on money should be done by someone who is not emotionally connected to the outcome and all they are there to do is get the money back.

If you don't have a person in your business dedicated to chasing up aged debtors, what steps can you take today to fill that role? And if you do have such a role already, do they have clear guidelines on when and how to follow up effectively with clients to protect your cash flow?

We'll cover those issues in upcoming emails.

Thursday, 15 October 2015 16:12

Earthmover didn’t dig deep enough

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:

  • didn’t do any credit reference checks on the builder
  • only gave a verbal quote for the job
  • didn’t have the builder sign a contract backed with terms and conditions that had been vetted by a lawyer
  • didn’t have the builder sign a Director’s guarantee saying he would honour the debt if the business defaulted on the loan
  • didn’t have the builder sign anything to say the work had been completed and was satisfied with the work
  • waited till the debt was 3 months overdue before referring it to us for collection

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:

  • Don’t provide credit to customers without doing due diligence and background checks to ensure they are credit worthy
  • Make sure you have a robust (i.e. lawyer reviewed) Contract, Terms and Conditions, and Director’s Guarantee in place and that the
    customer agrees and signs these before any work is done or services provided
  • Provide a written quote for a job and have the client sign and agree to that quote before the work begins
  • Have the client sign off when the job is completed
  • Follow up as soon as the debt falls overdue and never go beyond 45 days before calling in professional debt recovery experts

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?

Monday, 12 October 2015 03:55

Happy ending for steel fabricator

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.

Monday, 05 October 2015 22:23

Winery barrelled over by high value debtor

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?

Thursday, 24 September 2015 11:27

Using a Lien on a Motor Vehicle

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.

Did you know that you can get one free credit score per year? 

What’s a credit score I hear you say?

It’s the score that financial institutions use to access your creditworthiness when applying for loans or such.

This information is stored on your credit file by a Credit Reporting Body. There are three credit reporting bodies in Australia.

 

Veda:  MyCreditFile.com.au (Veda) Phone: 1300 762 207

D&B: CheckYourCredit.com.au Phone: 1300 734 806

Experian: Experian Credit Services Phone: 1300 783 684

Your credit score is a number from 0 to 1200 and is calculated from your history of paying back loans, credit cards and your history of paying bills.  When you apply for a loan the financial institution will obtain your credit history to make a decision regarding whether you are a credit risk.  If you have a good history they will loan you the money.  If you have a high credit score you demonstrate that you are responsible when borrowing money and are not deemed a credit risk.  Alternatively, a low credit score may deem you as a high credit risk and you may find it difficult to borrow money.

Anyone who has ever borrowed money will have a credit file. It has been legislated that Credit Reporting Bodies provide one free credit score per year per person.  This is your opportunity to verify the information is correct and have changes made if necessary.

If your credit score is incorrect it may hinder your ability to borrow money from any financial institution.

Here are the different levels of credit scores according to Veda. In case you do not know who Veda is; Veda runs the top credit bureau in Australia and has been trusted in this role for almost 47 years.  

833-1200 (EXCELLENT)

You have an EXCELLENT credit score. What does this mean? You have good standing and can be trusted to pay for loans and debts on your credit card. Also, this implies you are in the top 20% of Veda’s active in credit population and you’re HIGHLY UNLIKELY to have any bad records in your annual credit report. There is a high chance of you maintaining your files clear from any disputes at a rate of 5 times better than that of the general population.

726-832 (VERY GOOD)

This Veda Score suggest that you are 2 times better than the general population in terms of your credit score and in maintaining that status. It is unlikely that you will be subjected to an adverse event that might affect your credit standing in the next 12 months or more.

622-725 (GOOD)

This Veda Score implies that is unlikely that you will expose yourself to an adverse situation that might be in any way be harmful to your credit report and credit standing in the next 12 months. Your edge of having a clean credit report is better than average for Veda’s credit-active population.

510-621 (AVERAGE)

An AVERAGE Veda score means that it is LIKELY that you will have an adverse event in the next 12 months or so such as a default, a court hearing or at worst - bankruptcy.

0-509 (BELOW AVERAGE)

This is a score you would want to avoid. On this level, you are at the bottom 20% of Veda’s credit active population. This suggests a MORE THAN LIKELY chance of you having an adverse event in the next 12 months or so.

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."

Sunday, 13 September 2015 09:19

Plumber’s work goes down the drain

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.

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