WRITTEN BY Katie Innes
This month at Business Breakfast Club, Laura Scotton of BAL Lawyers discussed debtor management trends, how to set up good debtor management techniques and strategies, and what the next steps are for debtors who still do not pay. The breakfast ended with Katie Innes introducing BAL Lawyers’ new Debt Recovery Partner Site: Enforce Recoveries.
Getting debtor management right is imperative for the sustained financial health of any business. If poorly managed, the consequences for cash flow and growth can put a business at greater risk of insolvency, which may increase the exposure of your personal assets.
Principles of good debtor management should underpin the entire creditor–debtor relationship, right from the inception of all new contracts. The drafting of terms relating to credit and repayments should be specific and unambiguous, with clear obligations and consequences built into every arrangement.
Amongst other things, businesses should have trading terms (in writing) that stipulate the maximum payment time and any specific terms attaching to late payments, such as accrual of interest. Of course, these trading terms must be communicated to your customers and clients before you commence work; preferably they should be signed as well.
Good debtor management also relies on robust internal systems. Your organisation should be set up so that invoicing occurs regularly and that the terms of the invoicing are clear. You should also ensure that you create and maintain comprehensive records; not only is this essential for meeting your legal requirements, it will help your business render invoices quickly and avoid any uncertainty.
Once things are underway, there are five key steps you can take to ensure you set up good debtor management practices within your business:
When Debtors refuse to pay, even after you have followed up with them, sometimes you need to take it further to get action. While communication and relationships are important, you should be proactive about enforcing your rights to avoid getting deeper into the hole. There are several debt recovery tools available including:
Here in the ACT, many businesses can face unique challenges associated with contracting for the provision of goods or services to the Federal or Territory Governments, including late payment. However, changes will soon be coming into effect to ensure that small to medium businesses don’t have to wait as long. From 1 July 2019, the Commonwealth has committed to paying invoices under $1 million within 20 days, and is requiring large businesses seeking to secure government contracts to make the same commitments.
Chasing unpaid invoices isn’t fun, or an effective use of time for any business. Yet cash flow is king for businesses to grow and be sustainable.
BAL Lawyers is the legal partner of a new debt recovery website, Enforce Recoveries, to help businesses get fast payment from debtors. Once you’re logged in, you submit the details of your debtors and outstanding amounts. We then check the debtor details, perform a conflict check and send a letter of demand straight to the debtor.
Read the RiotACT Article on Enforce Recoveries here.
For more information, please contact Katie Innes.