Don’t let a bill get between friends

FOR some businesses, holding off payment for as long as possible is part of normal business practice, according to Receivables Manage-ment Limited State manager Mark Street.

Friendships also can be used as a way to extend credit terms.

In such cases, however, it is important to understand that neither party should play on the friendship to increase trading terms. Both sides should show clearly that they want to work together and, as friends, want to pay on time, Mr Street said.

It is important to show the debtor that receiving the money is important to your own business by staying on the case and not letting the credit terms blow out, he said.

“The first thing would be to send them a reminder letter five to 10 days after your trading terms, followed up by a phone call no later than a week after that if you haven’t received payment,” Mr Street said.

“You’ve got to talk to people. If you are not talking to people and you are just sending out letters you are wasting your time.”

Coming to some arrangement, like a discount or repayment option, with the debtor is always going to be better than going through the court system.

“You still are not guaranteed to receive the money going through legal means because it comes down to what the (debtor’s) capacity to pay is,” Mr Street said.

But sometimes, if the debtor flatly refuses to pay, legal means may be the only avenue left.

Before making an approach to a company for payment, it is important to make sure you know who actually signs the cheques. Without having the name of the director or proprietor, debt collectors can quickly be turned away or ignored.

Training sales staff to recognise symptoms of changes in client behaviour is important to head off bad debtors quickly.

Mr Street said salespeople needed to be trained to understand that a sale was not a sale until it was paid for.

“Make sure that the salespeople get a bit of information about the company before they are dealing with them. Watch out for people who come to you out of the blue because it may mean that they are having trouble paying the bills at their old supplier,” he said.

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