by Henley Recoveries Group7 Ways to Protect Your Business from Bad Payers
Nobody likes dealing with debt. Following up non-payers isn’t fun; it is time consuming, usually frustrating and often ends in businesses writing off money that they are rightfully owed.
When we are talking to business owners about utilising our services, we hear too often that they have been giving up on their attempts to receive payment for work that they have already completed. It’s only fair to be paid for what you’ve done – so here are our 7 top tips for protecting your business from non-payers.
1. Perform credit checks on your potential customers
One really easy way to tell if someone is a ‘serial debtor’ (ie someone who routinely doesn’t pay) is to have a quick look at their credit history. A lot of times we get asked ‘what can you actually do to make someone pay’ and the answer is: affect their credit history!
Credit history can tell a lot about a potential customer; whether or not they have defaulted on payments, if debt recovery agencies have recorded anything against them in the past, if debt recovery agencies have had amounts referred to them for collection, even how much money they have outstanding. Plus, the data is all up to date.
You can email us if you’d like assistance with performing credit checks on potential clients.
2. Have a signed contract with your client
Having a signed contract by the party that owes you money should not be underestimated. Contracts can mitigate disputes (and excuses) for non-payment, they provide proof of the works being signed off on, and you have a legally-binding agreement to follow up on. Not to mention that you can also add clauses into your contracts to further protect your business.
Think your jobs are too small for a contract? While we believe that no job is too small to have a signed agreement, we do understand that it’s extra paperwork and time – for both parties. At the very least, if you can get your clients to sign a quote for the work (a quote that points to your terms of trade), then it’s definitely a good starting point.
The next step is to make sure your contract (and/or terms of trade) are able to protect your business against not being paid.
3. Have your contract checked
A solid contract is a very smart investment – especially if your client accounts are of high value. Consider having a solicitor versed in contract law look over your contract to ensure that you are adequately protected and able to pursue recovering a debt to the full extent of the law.
Not ready to have a solicitor look over your contract? We know this can be very costly, so we are offering a free consultation with our legal team to give you some complimentary industry advice on your contracts. This isn’t legal advice and we still highly recommend that you have a solicitor look over your contracts but we do have a few tricks up our sleeves to recommend to you that allow you to get the most out of the debt recovery process, and ultimately: get paid.
4. Get written confirmation of variations to work
One of the biggest factors for non-payments that we see is a dispute over the work completed. Often the customer will ask for a variation to the original contract, quote or request – but do so over the phone. Then, refuse to pay stating that they never asked or approved that. The more you get in writing – the better.
We recommend that after you give the information about the variation to the job over the phone, you let your client know that you need them to sign a variation form for this to go ahead. At the very least, you should get them to confirm the changes in writing via email or text message. This means that there is proof and you can minimise any disputes that may arise while trying to get payment.
5. Photograph your work & get proof of delivery or completion
When you’ve protected yourself legally against incurring debts, the next step is to mitigate disputes. Like the written variation form above, ensure that you photograph or retain records of the work that you have done for your clients. This ensures that if a dispute does arise in regards to workmanship or quality of an item or service you provide, you can prove that it was done to a good standard.
Whether you provide goods or services, getting a signature on completion or the work or handover to the client is always another great way to mitigate disputes and non-payments.
6. Have a set invoicing and follow up system
This is featured in many of our previous blogs because it’s a very important step in the process of getting paid. We see a lot of cases where the client never received the invoice, or they simply forgot it was to be paid. By having a clear cut, written process for your accounts, you can ensure that every opportunity is given to your clients to make payment.
The process could look something like this:
Completion of the job
Within 24 hours
Send an invoice to your client. Doing so promptly ensures it is fresh in your client’s mind and making it more likely that you will be paid. Make sure you have your payment terms and due date on the invoice, as well as contact and payment details for you.
On the due date of the invoice
Send a friendly, automated reminder that payment is due today and make sure to clarify that if they have paid, they can ignore this reminder.
7 days past the due date
Send a friendly email stating that their account is overdue and that payment still hasn’t been received. Let them know to contact you if there has been any issues.
10 days past the due date
Send a text to your client to check if they’ve received your emails regarding their account.
14 days past the due date
Call your client and ask them to make the payment ASAP – let them know that you’ve been trying to contact them regarding this.
21 days past the due date
Send them a final reminder via email that their account requires payment and it is overdue. Let them know that they have 7 days to make payment before the account may be referred to your collections team.
26 days past the due date
Call or text your client once more to prompt payment. Let them know that the account may be referred to collections if contact or payment is not made ASAP.
28 days past the due date
Submit the unpaid invoice for recovery with your collections agency. Before doing so, you can try and give the client one final call to let them know that is what you will be doing.
Once your process for invoicing and following up on overdue accounts is in place, you then should only be left with disputes – or really difficult debtors.
7. Know when to involve the professionals
Unfortunately with disputes and difficult debtors, sometimes a solid contract and the best accounts procedure in the world isn’t going to help you get paid. There are always going to be a couple of really difficult people. Consider partnering with a no-win no-fee debt recovery agency, where they can do the follow ups and negotiations for you. Not only does this save you time, but it also saves money, relieves the stress on you from following up and frees your focus to where your time is best spent – running your business.
Henley Recoveries Group are a no-win, no-fee debt collection agency with an excellent track record. If you have unpaid invoices that need recovering, submit a debt with us for your best chance of getting paid. Our online form is easy to use and can be completed within 5 minutes.
You can also give us a call on 0466 243 114 or email info@henleyrecoveriesgroup.com.au for more information, or to discuss how we can help your business get paid.
by Henley Recoveries Group10 Common Errors That Make Debt Recovery Difficult
Debt recovery doesn’t have to be a long and difficult process. In fact, professional agents can achieve results quickly and effectively with the right information. Usually, the things that hold the process up are factors that come into play long before a debt is referred to a mercantile agency for collection.
A lot of the time, our clients aren’t even aware of circumstances that could potentially hold their case up. So here’s our list of 10 common errors that make debt recovery difficult;
1. Not having adequate protection against debts
We recommend always having your clients sign a contract, quote or terms of trade – no matter how small the job. Not only does this confirm that the debtor agreed to you providing goods or services, but you can also ensure that certain clauses are put into the contract to deter non-payments early on.
These clauses set out to ensure that you are able to recover any legal or debt recovery fees incurred while trying to get payment for invoices. In our experience, having these clauses within the contract has made the debts much easier and quicker to recover, and provides us with leverage to negotiate payment from the debtor.
2. Not gathering enough information from your debtor
Some of the most difficult debts to recover are those that come through with minimal contact information for the party owing money. Whilst we have recovered many cases with simply a phone number or an email address, they generally take longer to fully recover.
Important information to gather from your clients (to aid the debt recovery process) includes having at least a phone number, an email address, a postal or physical address and their full name. This allows us to cover all bases and have several methods to communicate with a debtor. Alongside that, should you wish to take any legal action you may require these details. We also recommend using this information to conduct a credit check on new clients.
3. Keeping insufficient or out of date records
Alongside not gathering enough information on the debtor, another common issue that we come across is having out of date client information. During your time with the client, ensure that you regularly check their contact details on record and ask them to update you if they have changed.
In combination with contact details, insufficient record keeping on the product or service provided to your client is also something that can complicate the debt recovery process. For example with our clients in the construction industry, a great deal of disputes we see could be solved with better record keeping. Keeping images of jobs and proof of materials purchased is good practice, as it allows us to prove to the debtor that the job was completed correctly, and mitigate any disputes that may arise causing settlement at a lower amount.
4. Insufficient quoting and invoicing
During the debt recovery process, if there are issues with our client’s quoting and invoicing, the debt is far less likely to be recovered. Errors and mismatching information on quotes or invoices is easily one of the biggest causes for disputes and non-payments that we see. If the administrative process is carried out correctly, it leaves little to no room for debtors to raise disputes or concerns about the funds in question.
When invoicing, not only do errors and insufficient information extend the debt collection process, but so does not invoicing quickly in the first place. While it can seem like a boring and administrative task, invoicing promptly after providing a product or service means that your work is fresh in your client’s mind – which naturally leads to quicker payment times.
See our blog on how to follow up on unpaid invoices for more information.
5. Waiting too long to refer an unpaid invoice for recovery
It’s no secret in the debt collection industry; the older a debt is, the less likely it is to collect. As debts age, we notice that the average timeframe for recovery begins to extend. Australian legislation also has ‘statute-barred’ debts, which outlines a strict time frame in which a debt can be legally pursued. Most states have a period of about 6 years; although we do recommend submitting a debt for recovery within a couple of months of it becoming overdue, for the best chance at full recovery.
6. Commencing legal action before trying debt recovery
We see many businesses that commence legal action before even attempting to utilise a recovery agency. This may seem as if it’s effective, however often it can be more costly and time consuming than simply going through a debt recovery agency. Debt collectors are skilled negotiators and are able to communicate with your debtors on a ‘clean slate.’ This means that a lot of the time, they are able to be more effective at reaching a solution or processing payments before wasting precious time and money.
7. Writing the debt off too early
On the other hand, writing a debt off too early because of the size or perceived difficulty of collection, is also a common occurrence. We have collected numerous debts that our clients were going to write off for being ‘too small’ or a ‘lost cause.’ Having a third party (in the form of a debt recovery agency) assist in the process, provides a fresh perspective and increased authority. Plus for debts that seem too small to recover, our agency operates on a no win, no fee basis – so why not give it a go!
8. Not being flexible or losing your cool
We aren’t talking about letting debtors just get away with simply not paying. This point is actually in reference to being unwilling to solve disputes. It’s very easy to become frustrated and fed up with a debtor who is repeatedly putting off payments. Reacting to the situation usually pushes debtors over the edge and consequently deters payment even further.
The best course of action is to remain calm and continue through your accounts receivable process. Be open to solving disputes (within reason) and hear out your debtor, or refer the debt to an agency to be collected. If you want advice on your accounts receivable process, you can contact us for a free consultation.
9. Only having verbal communication
While verbal contracts do carry legal weight, they are difficult to prove if the matter goes to court. The most effective safeguard against non-payments is to confirm prices, quantities or instructions for service in writing, prior to completing work for a client. An email or text message will suffice in the event that a contract or terms of trade is not applicable. Make sure that any variations or changes are also confirmed in writing, or through a variation form.
10. Letting client accounts build up
Another observation we have made is that many of our clients allow their debtors to build up rather large accounts with them. By the time it is referred to us, it takes far longer to solve as portions may be disputed, or even paid off. In turn, this also holds up the undisputed and unpaid amounts from being collected. Try to set a limit per client, based on their credit score or your company policy, as to how much debt they can incur before you cease to provide them with your services.
At Henley Recoveries Group, we specialise in debt recovery. We are experts at getting you paid! You can submit a debt for collection easily with us, in about 5 minutes using our online form. We are also offering free audits of contracts to help our clients to be protected against incurring debts. Email us on info@henleyrecoveriesgroup.com.au for more information.
by Henley Recoveries GroupManaging Your Post-Christmas Cash Flow
For some businesses, Christmas is one of the most profitable times of year, while for others it marks the beginning of their quietest period. Regardless of which category you fit into, effectively managing your cash flow is vital for maintaining the livelihood of your business. Here are five tips for managing that post-Christmas cash flow.
Follow Up With Your Debtors: Quickly
For businesses and individuals alike, Christmas and the period afterwards can be a maze of money management. Ensuring all overdue accounts are followed up on in a quick and timely manner, may be the difference between being paid and not being paid.
January to March is the period that a lot of entities get their accounts in line for the year ahead. By following up on your debtors in a quick and timely manner, you can get in before other businesses they may owe money to. This means that your accounts are paid and settled before the funds dry-up. You can read more about following up unpaid invoices in this article.
Review Your Accounting Practices
Ensure that you have good follow up practices in place for your accounts procedures. Set yourself a clear time frame for following up. By doing so, you are minimising the amount of overdue accounts that you are left with. That way, only accounts that need a push to recover get sent through to your debt recovery agents.
According to an article from Xero’s small business insights, cash flow falls to a yearly low across January. This means that as cash flow picks up, it is so important to be effectively following up overdue accounts – especially during February and March.
Forecast Your Cash Flow
If you have historical data for your business, use that to forecast figures for future holiday periods effectively. By understanding the data from previous holiday periods (and the time afterwards), you can ensure you can put plans in place and can mitigate unexpected cash flow shortages.
A great resource to help you with this is the cash flow forecaster from Business Victoria.
Prepare to Lodge Your BAS
Ensure that you’re using the down time to prepare to lodge your BAS for the next due period. If Christmas has been a particularly busy time of the year, make sure that you have effective practices in place to allow you to easily sort through receipts and invoices. This way, you don’t have to run around searching for information to complete your BAS.
Sort Out Your Contracts
If you are a service-based business, or one that provides goods on credit accounts, then early in the year is the perfect time to organise your contract and account terms. Ensure that you have clauses to protect your business and that your agreement allows you to minimise the potential of non-payment.
We are currently taking expressions of interest for a free contract audit, to ensure you are adequately protected against bad debts. You can apply for this complimentary service on this page.
Whether the new year means that you are too busy to follow up on accounts or you need some more positive cash flow within your business, it’s important to sort out overdue accounts. Make sure that you are leveraging the time of year and making space for positive cash flow for your business.
If you have overdue invoices that need recovery, you can easily submit a debt for collection by our expert agents in only five minutes, using our online form.
by Henley Recoveries Group7 Cash Flow Management Tips for Small Businesses
Cash flow can make or break a small business. Successfully managing incoming and outgoing expenses is more crucial than ever this year. If cash flow is poor, opportunities are limited, business growth is stunted and running a business is definitely more stressful. However, positive cash flow means that you can invest in resources that will help your business to grow and prevent times where cash flow is down.
Here’s our top 7 tips for promoting positive cash flow within your business.
1. Send Your Invoices Out – Quickly
It makes sense: the sooner you send an invoice out, the sooner you can get paid. Getting invoices to clients promptly ensures that your services are fresh in their minds and gives them time to make payment. Set aside time in your schedule regularly to send, follow up and reconcile invoices.
2. Create an Accounts Receivable Timeline
Having a strict accounts receivable process (and sticking to it) means that you can stay on top of amounts that you are owed. Make sure that you define this process and have strict timeframes put in place.
For example, as soon as an invoice becomes overdue, send a reminder to your clients. In that reminder, request payment within the next 7 days. If you still don’t hear back from them after one week, give them a call. Should they still not make payment or get in touch with you, send the invoice to a debt collector – the sooner you refer the debt to a collector, the more likely the amounts are to be recovered.
You can find more information on following up unpaid invoices in our last blog post. Or contact us at info@henleyrecoveries.com.au if you’d like more information about our accounts receivable services.
3. Review Your Options for Payment
The more methods that you make available to your clients for payment, the most opportunities you have to get paid. Consider investing into different types of payment options, including EFTPOS/card payments, BPAY and direct debits, as well as ‘buy now pay later’ options, such as AfterPay and ZipPay.
4. Future-Proof Your Cash Flow
All businesses have ebbs and flows – it’s never static. During a positive cashflow period ensure that you’re investing into resources to protect your cash flow during tough times. For example, you could invest into marketing to ensure that you retain a steady stream of sales. You could even invest in new products, or training staff in different areas to expand your product and service offering.
5. Consult a Finance Professional
Engaging the services of a financial advisor doesn’t have to happen when your business isn’t doing well. When consulting a professional, they can help you to review your current processes, create a plan and put measures in place to prevent future losses. The Australian Government has details and recommendations on financial counsellors on the MoneySmart website.
6. Review Your Credit Terms
Providing credit to customers isn’t a bad thing. However, it can go downhill quickly if you don’t have strict terms that you provide that credit under. Ensure that your terms of trade, or client engagement contracts have clauses that protect you from incurring costs when collecting and following up on unpaid invoices.
7. Perform Credit Checks
Prior to engaging into a sizeable contract with a client, ensure you perform a credit check to see if there are any mercantile enquiries, payment defaults and other late or missed payments lodged against them. This allows you to ensure you aren’t engaging with clients who have a record of avoiding payments. You can request a credit check from Henley Recoveries Group by emailing us.
No matter the size of your business, cash flow management is important. By building out an accounting regime and planning for the future, you are preventing losses during months where cash flow is limited. Ensure that you are investing during the good times, so that you can mitigate the impacts of the unknowns and unavoidable situations.
Henley Recoveries Group specialises in cash flow management. Book a consultation with one of our senior consultants for personalised information and advice on your accounts receivable and overdue invoices. You can also Submit a Debt for collection, or call us on 0466 243 114.