October 2015 Edition

In this edition:

Welcome

Payroll tax - the basics

Ways to improve debt recovery in your business

Sickness doesn't discriminate so why should insurance?

Now for something completely different!

An inefficient debt recovery process will result in a lot of time and effort wasted. This can lead to a loss in productivity and poor cash flow. The long-term effects of constantly chasing bad debts may result in your business being forced to close its doors. There are many positives which can be gained from becoming more efficient in the debt recovery process. We provide the following tips to improve your debt recovery processes:

Tip 1. Assign someone to be your 'Debt Collections Officer'

Where possible someone in your business should be assigned debt recovery duties. This helps ensure the debt recovery process is streamlined and efficient and will avoid having multiple people within your business contacting the same debtor. If you do not have the resources to handle this internally, you can assign these duties to an external debt recovery service provider.

Tip 2. Document and record any contact with the Debtor

Follow a documented and systemised process of invoicing and following up late payments. This process should be readily available to everyone involved in your business transactions, including the debtor, so they know what to expect and how often the debt collections officer is likely to make contact.

It is vital to log all contact with the debtor. This includes keeping a record of any written communication sent to and from the debtor. This record will be required if you end up initiating debt recovery legal proceedings in Court. It is also a good idea to get a written 'payback' commitment from the debtor either via an email or letter.

Tip 3. Attempt to communicate verbally and positively with the debtor

This should be the first step your business takes as soon as you become aware of a debt. Non-verbal communication can sometimes appear rude and often gets lost in translation and can be taken out of context. This could lead to you permanently losing the customer. Always make an attempt to resolve the issue by speaking directly with the customer.

Being owed money is frustrating but that should not stop you from being professional and maintaining a positive attitude. We recommend offering the debtor flexible payment options, even if those options aren't described in the contract only use this in situations where you want to retain the customer. Legal action should only ever be seen as a last resort.

Tip 3. Screen 'new' or 'potential' customers carefully and know who your customers are

If your customers are purchasing high-value goods or services from your business you need to identify who they are and screen them, wherever possible. This becomes crucial when initiating debt recovery proceedings against them. We recommend always undertaking a company search through the ASIC website (asic.gov.au) and taking down as much customer detail as possible (driver's licence, etc.). It may be handy to double check any details given against publicly available databases, like the White or Yellow Pages or even social media.

Tip 4. Offer incentives for early or instant payment

The easiest incentive is usually a discounted price. We also encourage you to be creative in the way you offer an incentives for example: if you know who your customers are and how they operate, to help nurture a stronger and longer term relationship it is a better idea to create an incentive that a customer would respond better to such as exclusive access to a product.

Tip 5. Contracts and terms that are clear, transparent and accessible

We recommend setting specific and realistic credit limits, payment terms and methods for payment at the beginning of the contract. This may individually suited to each customer. The contract should be clear, transparent and accessible to all parties involved in the transaction. Where possible we recommend having a debt recovery expert involved in this process to ensure the contract and its terms reflect the needs, capabilities and resources of your business.

Tip 6. Be prepared to say Goodbye

At some point during the debt recovery you may have to pull the plug and put a stop on the customer's account. This sends a strong message that you will not to be taken advantage of.

If the debt is significant you may want to initiate legal proceedings in Court or contact a debt recovery service provider. If the debt is small this could mean just cutting ties and moving on.

If you are having difficulty in the recovery of your debtors please contact your Goodwin Chivas Partner or Manager.