One may feel anger, dismay and frustration when someone who has an obligation to pay for goods and services does not do so.

Until you are paid, the debt exists. It follows that you are giving credit to the other person for your goods and services, until you are paid. As creditor, you are financing their business activities and placing your business in jeopardy.

You own this debt and if necessary, you can take steps to recover the money owing to you by the debtor. The steps that you take depend on whether the debt secures any of the debtor’s property (including stock). Most debts are unsecured. You must have the appropriate security agreements under the Personal Property Securities Act in place to protect your legal position if there are competing interests.

People still rely on the good word of debtors that they will honour payment. Most businesses continue to trade relying on such promises. At times, however, and for whatever reason, the debt remains unpaid. If you work hard to build up your goodwill, you could be hesitant to “push too hard” your customer for payment. However, not all debtors will pay and this may have an adverse effect on your ability to trade or even pay your own debts. This affects cash flow and you still must recover the debt. An unsecured debt is likely to be more difficult to recover and become bad. For any a good enterprise to succeed, a mixture of solid financial procedures, good marketing and efficient practices must work hand in hand. After all, you must give good customer service to all areas.  

AVOID BAD DEBTS FROM OCCURRING

You can stop most debts from becoming bad, by taking proper precautions before giving credit. You should take immediate steps to recover the debt when it is unlikely payment will occur.

"ALL IS NOT GOLD THAT GLITTERS"

What does this proverb mean? Sales people can sell and promote goods and services and set sales budgets, but until those customers pay for the sale, there is no real sale. Although you and your team work hard, you are losing money. Therefore, you must develop a system that controls the credit that you extend and guarantee payment.

Everyone is different in the goods and services they provide. One should tailor each credit control system specifically for those needs. A good system must cover credit applications, procedures for enquiries, proper referencing, retention of ownership of goods, security agreements and guarantees from the debtors or third parties for the payment of the debt.

Credit control is customary, but there are an amazing number of people and businesses that either do not have such a system in place or have only copied another system. A word of advice, you risk losing your money if you come under these examples. “A job ill done must be done twice”.

At times, your relationships with your customers ought to be set out in a specific agreement. The agreement ought to define all the parties’ obligations. Never leave such an agreement to chance. Get legal advice to secure your position with the other person.

When the debt is overdue and it appears the debtor has no reason for the delay, you must act quickly. If you do not act early, there is a good chance the debt will become bad. You will lose your money. Your internal procedures must immediately recognise and respond to unpaid and overdue debts.

Time is of the essence. When those procedures fail, you should consult Behan Legal at once to act. Behan Legal will carefully look at your claim and determine the best course of action available.

NEED MORE INFORMATION

Behan Legal advises and assists clients on these important issues. For an appointment, call 03 9646 0344.