Smart business people know that a sale is not a sale until they are paid, smart business people also know it is not always possible to be paid right at the time of the sale or when an order is placed and the smart thing to do is to give their customers time to pay or 'put it on the books' rather than lose that sale.
Once you allow your customer to book up your products you are entering into a credit situation. This really means they are lending money from you to pay for the products they have purchased, this is with the intention of paying you back in the future. Now there is nothing wrong with this, this is how commerce works and how we create income and wealth for ourselves. This system has worked for thousands of years and mostly on face value or a handshake.
But times have really changed and up until 2008 when the global financial crisis occurred, trusting others in this manner had largely worked out alright.
Thankfully, there has been some significant changes because our government has reacted in a very positive way, this was to implement a fair system that benefits all businesses not just big organisations or banks.
By introducing the Personal Property Security Act in 2009 or PPSA, all businesses can now be protected. What this means is that if you enter into a commercial arrangement with someone, you can register your arrangement through the PPSA register, called the PPSR and become a secured creditor.
Let me explain this is simple terms with a scenario we all understand, if you have ever had a loan with a bank you would have signed a contract, in that contract you give the bank security over certain assets. In the event you could not meet your financial commitments the bank would seize assets owned by you to the value of what was owed, including any cash, property or inventory if you had a business. The bank always sat on the top of the food chain in this respect, it made no difference if you owed money to other creditors the bank came first. With the introduction of the PPSA in this scenario the bank would only be able to seize assets it had a legitimate right to, let say your inventory include products used to build something, say it was timber and you build sheds and your timber supplier registered the timber on the PPSR then the bank would have no rights over that timber and could not seize it. The timber vendor through a retention of title on the PPSR, would be secured and have the right to come and take his timber back.
Thousands of successful business across Australia are taking advantage of this system, if you are a business owner and sell products on credit we urge you to put this in place or risk loss due to these changes.
You see these changes protect those who are registered, in the case where a company goes into liquidation when appointed the first step a liquidator will take is to check the register to see who has security over any of the assets, those on the register are secured by this. If you have any products or inventory present on the premises at the time of liquidation they become assets to the liquidators and will be sold off to pay the debts and the first debts to be paid will be those from the registry.
Putting this together does not have to be difficult everything you need to be PPSA compliant is included in our Credit Management Toolbox.
Following is a list of things you need to do to implement the PPSA in your business:
Then your customers must give their expressed permission for you to pass their information onto the PPSR (registry), that means they must sign a contract with your organisation to give permission to put their information on the registry.
Once you have all the above sorted out you can start using the PPSR and truly be a secured creditor.
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.
It seems that we are well and truly into Election mode here in Australia and the media has definitely not let up on this. There has been a very thorough campaign drive to get Australians to enroll to vote and having twin boys just turn 18 has also highlighted this in our household.
I know some of you savvy business people may be thinking this would be a great time to head down to the electoral office and have a look for fresh information on some lost debtors. If you weren’t thinking of this and now are please read on, as there are some very large consequences for misusing that information that I would like to make you aware of.
What the Institute of Mercantile Agents Say
Recently at the Annual Institute of Mercantile Agents Conference the electoral role came up in discussion as an issue of privacy and the rules around using it as a method of finding people who owe money. The institute’s direction to members was that the electoral role was not an acceptable place to search for debtors as there are strict rules around the use of the information on the role. The CEO Alan Harries outlined the dangers of misuse and fines that can be incurred if found guilty of an offence.
Two Important pieces of information
What I would like to highlight here for you is two important pieces of information from the electoral commission website which Mr Harries was eluding to. Please find as follows;
- An electronic copy of the current electoral roll (e-roll) is available for public inspection at any AEC office. You may inspect the publicly available electoral roll for the purposes of:
• Checking your own enrollment details, or
• Making an objection to the enrollment of another elector.
You may not copy, record or photograph any information from the electoral roll with any electronic device.
- The roll is not available for sale in any format. Consistent with the restrictions that are in place for roll information provided under section 90B of the Commonwealth Electoral Act 1918 (section 91B contains offences on the commercial use of section 90B information with penalties of up to $170 000), the AEC discourages any inspection of the roll information that involves some commercial or other non-electoral use of this information.
As you can read there are large penalties up to $170 000 for misuse of the information.
Further to this I would like to let you know that BCA Debt does not use the electoral role as a method of finding debts, BCA Debt use paid legitimate searching companies for the purpose of finding your debtors and the staff of BCA Debt follow strict guidelines when searching for people.
Breaching a Persons Privacy
I would also like to point out that breaching a person’s privacy has now become something that is not taken lightly by us or the industry we work in and I cannot stress enough how important it is for all businesses and their personnel to be conversant with the ASIC/ACCC Debt Collection guidelines for collectors and creditors.
No matter how frustrated we get at the people who owe us money, when it comes to debt collection you must be careful you do not defame your debtor.
As you know being owed money comes with a myriad of emotions and the tendency to voice opinions about the person who owes you money. Whilst I understand the obvious need to vent frustration it can come to the point where you may be defaming that person.
Well you have defamed a person if you make statements about them that
A defamatory statement can be verbal or written. The statement must be published or made known to other persons other that the person being defamed. Defamation includes talking about that person in conversations to other people, writing about the person in articles, on websites, through email or other communication.
Even a private conversation in a pub or restaurant could be overheard and result in defamation proceedings.
All parties to any publication as explained above that defames a person are liable for the defamation, not just the author. This means that if you receive an email or letter that includes defamatory information and forward or distribute it, you can be sued as well as the author.
Just remember, you never know where an email may end up. If you have defamed a person you may be liable for damages (money), however if you can prove the defamatory information is substantially true you can’t be liable. Although in this case you may want to make sure your defense is watertight.
No matter what you must be careful you do not defame your debtor.
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.
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 many years of running BCA Debt, we have observed five common mistakes businesses make! By changing these five mistakes, you can prevent your customers from becoming debtors and increase your cash flow.
5 Common Mistakes Businesses Make;
Not having good Terms and Conditions is a common mistake.
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 for any business deal you enter, be it good or bad.
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, but they are not experts in the field.
Your Terms and Conditions are the blueprints of how your business operates, you, your staff and customers should intimately understand every aspect of them, this is how you prevent deals from going bad.
The reason I say this is because the majority of problems experienced during disputes and conflicts between a business and a customer are that there is no clear understanding of each other’s responsibility when entering a business deal. Often neither party is clear on the expectations of the job because the Terms and Conditions are not clear, or simply do not exist.
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 a font that makes you feel they have sinister overtones.
Making it difficult to decide 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 a little effort, we can help you produce user-friendly Terms and Conditions for your business.
The simplest way to get started is to brainstorm all the things that frustrate you, both in-house and from your customers.
Put these together with your payment requirement and you have the beginnings of a good document that will help prevent customer becoming a debtor.
Fewer 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 non-payment.
We offer this program for individual businesses; it 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 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 and wish to put in place best practices.
We have seen just about every trick in the book.
That is the reason we have produced a Suite of documents for the Credit Management Toolbox.
At BCA Debt, many of the debts that come to us could be avoided if the business has in place the Toolbox we are offering.
Why risk any further loss of income and more financial pain? Could you 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 may suffer cash flow problems. Let me help you create simple policies that your staff is empowered to use when quoting and accepting a new customer.
I can help you be clear on your terms and conditions, by writing in plain English, easily understood by you and your customers, including clearly defined dispute resolution processes.
Let's include clauses that put 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.
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 and start managing your business the way other successful businesses including many of our clients have done.
5 Common Mistakes Businesses Make
1. Business does not have clear credit management policies.
2. The quoting process does not clearly define the outcomes of the job, for both the service provider and the customer.
3. Not knowing exactly who the customer is, and the exact name of the person paying the bill.
4. The terms and conditions are written in too smaller font.
5. There is no disputes resolution outlined, for both business and the customer.
I am not sure if many business realise there has been changes to the privacy laws and these changes affect everyone in business who collects information from their customers.
The privacy act now includes 13 new harmonising Privacy Principles, known as the 13 APP (13 Australian Privacy Principles).
The first thing you need to know about these principles is, if you breach them you may be up for a very hefty fine, the privacy commissioner has the power to seek civil penalties of up to $1.7million. Not only that, if there is a breech and a civil penalty is imposed by the commissioner the individual whom has been affected can seek compensation. This compensation could include a recompense for hurt feelings.
Hey Nichola! Did you say ‘hurt feelings’... Yes I said hurt feelings.
OK, from now on make sure you do not put anything into your notes that is derogatory, nasty or makes the person look or feel bad in their eyes or the eyes of someone else.
The privacy principles are about protecting personal information, this is the information on individual people.
So who is an individual person in the context of your business?
Basically any information that you collect about a human being is now protected by the privacy laws and there is two types of information.
The difference between these two is, now you cannot collect sensitive information on an individual. This also means that you cannot write in your notes any information about a customer that is sensitive. You can only write information, that is relevant to your business that would be required in the ordinary cause of your day to day activities.
The information you collect must be relevant, you cannot keep information incase you may use it later, it must be relevant to the moment. Not only that, you must make sure that the information you collect is correct at all times and if a customer supplies you with any changes you must make those changes.
Also the Privacy Law warrants that if an individual requests to see the information you have collected on them, you must give them access to it. They also have a right to correct their information.
Moving Forward: When it comes to handing personal information over to a third party you now must have expressed permission from your customers.
Expressed permission means that your customer must sign off on and agree to you passing their information on.
Then your customers must sign that document.
There is more info at http://www.oaic.gov.au/
It's just unbelievable how much the debt collection industry has changed and now there are more changes about to happen in the Credit Providers arena.
As of the 14 March 2014 new laws will come in that will change the way credit is given to consumers.
This will undoubtedly have an affect on business in general, the changes have been bought in to enable Credit Providers to cross reference consumers credit information. The information provided on a consumers credit file will now include payment history on all credit providers accounts.
What does this mean:
What does this mean for businesses?
In summary business will need to be aware of those customers who change their payment habits, it should ring alarm bells if a customer who normally pays on credit card is now asking for credit.
Ensure you have all current details of your customer and know who they are.
This is a link to an excellent website that explains how the new system works, I encourage all to have a really good look at it, it effects us all.
Don't think you will be able to access a consumers credit report because this is not legal, only those with a credit providers licence will be able to access this information. The fines are huge for a breach so it wouldn't be worth trying.
All I can do is urge you to have a good poke around the http://creditsmart.org.au/ website.
What is a Statute Barred Debt?
These are debts that have reach the statutory limitation period. This means that the debt has reached an age where it is no longer legal to pursue.
Each state of Australia has a period of time where a debt can be pursued, and has legislation in place that outlines what happens when the limitation period has expired.
Limitation periods for unsecured personal loans and credit cards and the majority of debts sold or referred to a collection agency will arise from simple contracts. In all states the limitation period for this type of debt is 6 years, except the Northern Territory where it is 3 years.
These are debts following a court judgment
All states are 12 years except South Australia and Victoria where it is 15 years.
This usually starts at the time the debt is entered into. However it is not always that straight forward. If a payment arrangement is entered into or the debtor acknowledges the debt in writing the period of limitation recommences at this time.
There is a section in the ASIC / ACCC Debt Collection Guidelines around collecting on statute barred debts, I encourage all businesses that have an older debtors ledger to ensure that you are not following up on these types of debt and to have a good read of the guidelines.
Please find a copy of this document below.