Credit Matters

Invaluable Reading From Australia and Around The World

Contributing to our position as Australia’s premium Financial Risk Management resource, our management globally explores and surveys relevant and valuable articles published by respected professionals, academics and organisation. The articles offered here are suggested reading for any Business Owner and Financial Risk Management professional.

Invaluable Reading From Australia and Around The World

Debt Collection

Late Fees: The Hows and Whys of Charging Them

Dean Kaplan

10 Jul 2019

Dean Kaplan raises a useful idea to help collect outstanding the funds owed on unpaid invoices which is to charge interest for late payments. Obviously, you will need the customer's authority to charge this interest and you must only use an allowable interest rate.

There are many rights you can include on your credit agreements, like this right to collect interest for late payments. The key point of this article is to have negotiation tools to help you recover the funds owed for late invoice payments.

It is not mentioned in this article, however if the customer refuses to sign your agreements which includes rights to protect your business, this is an indication the customer may be untrustworthy. You can also find more information about the importance of having a properly signed credit agreement in our Members area at www.creditmatters.com.au under our Red Flags feature.

In the meantime, Mr Kaplan's article provides useful information about one of the key rights which may protect your business. The right to charge interest for late payments is a useful tool when collecting monies owed for unpaid invoices.

 

Banks rejecting SMEs for finance

Loren Webb

25 Jun 2019

This article provides the basics of the facts that the banks are reluctant to lend to SMEs and points out that there are other sources of finance available. Nothing in business is ever that simple, however. For instance, where is the cheapest form of finance? B2B finance of course.

The trouble for B2B credit providers is that now as the number one target for credit poor business customers. As a result, they have to be ever more vigilant and disciplined. Of course, with every negative, there are also positives. It is up to the B2B credit provider to work out and structure their business to take advantage of these developments.

The first place to start however, is to do some research and then decide how to move forward with confidence. One such source of information which may provide some useful data and promote critical thinking, may be this article.

 

Australia: what can businesses expect?

Atradius Report

17 Jun 2019

Atradius have produced a brief report on the Australian business environment today regarding payments, bad debts and the state of credit management strategies.

The report is brief. I suggest however it is worth a read for all business owners, managers and associated professionals interacting with Australian businesses, particularly if your business is offering B2B credit.

Pick up the phone!

Ingrid Maynard

30 May 2019

The author Ingrid Maynard, highlights one of the key elements of good business, being able to use the telephone. Ingrid further articulates the reason why telephone calls are so effective.

Today, it is not just salespeople which seem to have trouble picking up a telephone and talking to another person. This issue is across the whole business spectrum from management down. Too often, it seems people at all levels of business are almost frightened about making a telephone call. We also note that too many business websites appear to lack a telephone contact number or if you do make the call, speaking with the correct person is also a challenge.

Yet picking up the telephone and saying, "There seems to be a problem with ... can you please help", making a warm contact for a sale or trying to close a sale, is so effective.

Irrespective of whether you are in management, sales, accounts receivable or customer service, the telephone remains one of the most useful tools in business. If you have trouble understanding why a telephone call is so valuable, I suggest reading this article may prove helpful.

Better A Year Early Than A Day Too Late

Adam Taggart

5 Feb 2019

As the author, David Taggart suggests, trying to predict the timing of disruptive events is a fool's errand. Very few people can predict the exact time of a future disruptive event. We can predict what might happen by looking at the causes of historical events and what is happening around us. In such cases, even if our predications do not eventuate in full, those that acted early can gain an advantage.

Mr Taggart offers the following example of people who paid attention in the years leading up to 2008. These people had arrived at the conclusion that bad policies and overly-loose lending standards had resulted in bad situation which would eventually lead to real problems. Did these people know the date of the tipping point? No. But they knew the probability for a major financial crisis was a certainty.

He goes on to suggest, the people who positioned themselves early avoided the losses that everyone else suffered and a few, even made massive profits.

Today we face a similar situation with an expected business down turn in 2019 and 2020. There may even be a recession. Do we know when this downturn or recession will actually be declared? No, but that does not stop the more prudent of our fellow business and social acquaintances starting to take precautions to protect their business and other assets.

Waiting for the exact date of a disruptive event is never wise. Irrespective of whether you believe we are about to have only a downturn or a full-blown recession, it is better to consider a more cautious approach in the coming year. On that basis, reading Mr Taggert's article may be of benefit in helping you decide whether to start taking action before the effects of any downturn impact negatively on your own situation.

 

The Best Payment Reminder: Top 10 Strategies

Jan Reeves

14 Nov 2018

Jan Reeves is a proven credit management professional. She has prepared a list of 10 strategies that have worked for her over the years when following up on unpaid invoices to improve cashflow.

Like Jan and myself, we never stop learning. We are therefore always on the lookout for new strategies on how to deal with our customers regarding unpaid invoices.

 If you are looking for new strategies to use with your customers and improve your business's cashflow, reading this article maybe of value.

Contracts must be built on ethics, because they can even confuse lawyers like me

Clare Payne

30 Sep 2018

Claire Payne's article about contracts appears to be based on those prepared for the banking and finance industries. Notwithstanding this focus, many of the issues raised by the author also apply in the B2C (business to consumer) and B2B (business to business) environments when extending credit or completing customer projects.

There have been many changes to Legislation and a focus on unfair contracts in recent times. The author's article is a timely warning that your business contracts need to be both relevant and ethically fair. To rely on old contracts which contain unrealistic rights and penalties, are poorly constructed, with terms which you don't understand or are basically unfair, is a waste of time and money.

Therefore, reading this article may be of value in helping you understand the importance of having up to date and professionally prepared contracts for your business.

Contract Terms that Stop Payment Problems

Dean Kaplan

26 Apr 2018

Ask any credit management professional, debt collector or lawyer collecting a debt or trying to manage a dispute, what are the most important aspects of success?

Without doubt, their answer will include a properly prepared and signed credit or trading contract, plus supporting documentation.

Dean Kaplan, an experienced debt collector from the US has written a blog on these aspects.

Another important aspect is that properly prepared contracts and good paper trails also provide excellent evidence for purchase and sales fraud investigations.

If you are starting up a new business, reviewing your credit or trading contracts, or need to be convinced on the importance of good contracts and documentation trails, this blog may be of value.

Why You Should Fire Your Worst Customers

Steve Cartwright

20 Feb 2017

Understanding and managing your costs is essential if you are to make a profit in business. Despite the mantra that the "Customer is King", not all customers act like a good king. There are those customers which do a great detail deal of damage to you and your business.

As Steve Cartwright illustrates in this article, there are always costs to dealing with customers. The cost however, in dealing with unprofitable and difficult customers often grows exponentially above any potential benefit. Furthermore, as Mr Cartwright points out, the costs are just not financial. There are other costs involved including, emotional, respect and lost time which could be better spend on other projects.

If you are having problems with difficult customers, Steve Wright's article may be of value in addressing some of the issues you currently face and help you decide on how best to deal with your worst customers.

Credit and Collections 1.01 - Credit Applications & Personal Guarantees - Why they're still relevant

Chris Hayes

20 Jun 2016

Chris Hayes writes about one of the forgotten tools of credit management; the personnel guarantee.

His comment on what many people say, “… personal guarantees aren't worth the paper they're written on” is based on a myth from “the good old days".  This myth come about because many creditors failed to validate the worth of the security supporting the personal guarantee.

A personal loan is no different to taking any other form of security. If you aren't prepared to do the work to validate the security or to understand the nature of the security, then of course the security may be worthless. Notwithstanding all the work which is required to ensure that it is worthwhile accepting a personal guarantee, the guarantee is still a valuable credit tool.

If you now think is time to revisit the use of a personal guarantee as security, this article may be worth a read as a starting point for your investigations.

The 'Autonomous Customer' paradox; customer service is more vital than ever

News release by BT and Avaya

21 Feb 2016

In the modern age, the customer who wants everything is the norm. For instance, those business people who sell on credit, usually find the customer believes they have the right to change the terms of trade or not pay at all.

The situation is exactly the same from the modern autonomous customer who approaches your business. They want everything their way. If you don't offer almost every interactive contact method known to man or woman, then your business may miss out. Despite adhering to their demands, there is still no guarantee they will transact any business with you.

As in all things to do with business, nothing is simple. Furthermore, the customer is not always right. As a consequence, if you believe you must comply with the autonomous customer's demands, then doing it right is essential.

This brief article, with an option to download a PDF white paper, may be of value if you decide your business must cater for the autonomous customer's every need.

Red Flags Of Potential Collection Problems

Dean Kaplan

11 Jan 2016

Dean Kaplan is an experienced business professional and debt collector from the US. In this article, Dean provides a number of red flag indicators which may indicate future cashflow problems for your customer.

These same indicators are observed and applicable within the business environment of any country. For instance, I suggest other experienced credit professionals, debt collectors and insolvency practitioners from all countries would have seen similar red flag indicators during their careers.

Dean points out there are other indicators which may be useful in specific situations which he has not detailed. Educating yourself to be on the alert for any unique red flag indicators which are applicable for your industry, is just as important.

A useful aspect of this article are the explanations which are included to illustrate the problems behind the red flag indicators.

In the turbulent business world of today, being aware of the indicators of customer cashflow problems is an essential component of business survival and to reduce unnecessary costs and bad debts.

If you are unaware or would like to refresh your knowledge of the red flag indicators of cashflow problems, this article may be of value to you.

What Do You Mean That the Creditor Will Not Sue!

Martin F. Goldman, Attorney

10 Aug 2015

Business is its own art form. Amongst the tools an artful business person will use to collect their accounts from recalcitrant debtors, is legal action. Taking legal action can be expensive if used badly, just like any other business tool. Using legal action as it should be used is often the difference between making a profit or a loss.

I am not suggesting all debtors should be sued for all outstanding debts. Knowing how and when to take legal action is the important issue. If you always run from a contest at the legal action stage, then you are unlikely to come to grips with use of legal action. Furthermore, and inevitably, you will continue to lose money unnecessarily.

In my experience, the business people who know how to use legal action properly are generally good business artists. I also believe they operate more profitable businesses over the long term, than the business person who is always afraid to take legal action.

If you are unsure of what I mean, reading this article is a good place to start when thinking about legal action. The writer has declared their vested interest in this subject and his desire that more business people consider taking legal action if appropriate. However that should not distract you from looking at some of the more positive reasons why, on the right occasions, legal action is effective.

Statutory Demands

Adam Stewart

8 Feb 2015

One of the weapons available for use against a delinquent debtor is the use of a Statutory Demand. Used properly, it is an effective tool in obtaining payment from your non-paying customer.

However the use of the Statutory Demand must be applied correctly as it is not without certain pitfalls if not served properly.

If you would like to know more, this blog by ADC Legal offers an introduction on the Statutory Demands. Of course, legal advice must be sought to ascertain whether a Statutory Demand is applicable for your situation.

How To Win An Argument

Dean Kaplan

9 Oct 2014

When a dispute occurs in a business relationship, it is important to maintain a focus on the issues. Unfortunately however, these disputes can escalate into arguments. In these situations it is not unusual for emotions to rule the discussions rather than common-sense and then nobody really wins.

Dean Kaplan provides a number of strategies to avoid your disputes becoming the arguments. Whilst Dean is talking about his approach in the debt collection environment, his strategies apply across all areas of business.

It is probably worth remembering, amongst the most stressful work environments, where emotions can run wild, is in debt collection. Therefore I suggest, if Dean's strategies work in this environment, they are going to probably be effective in most business situations.

Inexperience business people or those with vested interests in the outcome, sometimes find it a struggle to keep focused on the issues during the initial stages of a dispute. Consequently these disputes sometimes become full-blown arguments. If you find yourself in these arguments and find it hard to create a win-win outcome, I suggest Dean's article is worth reading.

 

 

 

Is Your Credit Policy Costing You Money?

Dean Kaplan

24 Aug 2014

Many years ago, when I first became involved with lending and advancing credit, I was advised that a reasonable level of bad debt write offs, was sign that you had maximise selling and profit opportunities. This case was put to me during my years involved with both consumer and business to business lending.

An open slather policy on advancing credit, is usually a good way of going broke and is not advocated. However a balanced approach about why you are in business, what it takes to succeed and how you should extend credit are questions should lead you to understanding why a level of bad debts is not always a sign of a business in trouble.

Therefore Dean Kaplan's article raises a valuable business question; "Is your credit policy costing you money?"

On that basis, Dean's article is worth reading as start for re-evaluating your credit policy and or learning about advancing credit.

 

The Risk of Dodgy Debt Collection

Natalie Walker of Blitz Credit Management

5 Aug 2014

Natalie Walker illustrates a number of issues which can cause problems for the business owner who uses a dodgy debt collector. Her observations are based on a recent case brought by the ACCC.

Today there are strategies and tactics which are no longer acceptable and might be used by debt collectors in an effort to collect the debt. The dodgy debt collector will often employ such unacceptable tactics which are now illegal. In turn, if such illegal tactics are discovered, the ACCC may well take action, which allows become public at some stage.

Often, and what is often not realised by many business people, is that they can also be included in any action initiated by the ACCC. In addition, if the alleged behaviour is serious enough, the police may also become involved.

If you wish to avoid the unpleasant repercussions and bad publicity of using a dodgy debt collector, Natalie's article is worth reading.

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