|
|
A NOTE FROM OUR MANAGING DIRECTOR
I don’t want to sound alarmist, but the end of the financial year is rapidly approaching, meaning you have less than two months left to get your business financials in order.
Before I get to that, I’d like to thank those of you who completed our communications survey. I’m thrilled to say that our communications seem to be ‘hitting the mark’. You told us that you enjoy our email newsletters (once every few months), you’d prefer to not receive direct mail from us, and that LinkedIn and Twitter are a great way for us to share ‘bite-sized’ tips and updates with you. Topic-wise, you enjoy helpful, short tips and articles that you can use to prevent debt and manage cash flow. I think this comment sums up how our clients feel about our communications:
“You do a wonderful job, clearly explaining things, and offering good tips on how to prevent and manage debt, as well as providing good information about cash flow and general business tips".
Speaking of helpful tips, I’m proud to announce that Optimum Recoveries is a sponsor of Depot[x] in 2016. Intrigued? You can read more about that in this issue.
In our February e-newsletter, we gave you invoicing tips – to increase your chance of full, on-time payment. I hope you were able to put those tips in to practice in your business. If you’d like a refresher, you can read the tips again on my LinkedIn page.
This quarter, our focus is on tidying up those accounts and recovering what’s owed to you before the end of the financial year.
There’s an article that explains what steps you need to take now if you are considering writing off bad debts this tax time.
We set the record straight about the risks of giving your ‘good’ clients ‘second chances’, and provide some simple trigger points that you should build into your business process to know when it’s time to call in an expert to recover that unpaid invoice.
Finally, our Legal Eagles explain how the Personal Property Securities Act can help defend preference claims.
Until next time,
Angela
|
|
DON'T MISS OUT! WRITING OFF BAD DEBTS AT TAX TIME.
Outstanding invoices can have a significant impact on your bottom line and cash flow.
Engaging a third party collection agency like Optimum Recoveries is an effective way secure payment from debtors. Specialised skills aside, we have access to advanced tools to help locate and communicate with debtors, using new telephone technologies and third-party sources that grant access to debtor information.
Unfortunately, some debts are just simply unrecoverable. These debts are referred to as ‘bad debts’. Debts turn ‘bad’ for a range of reasons, but one of the more common reasons is that the debtor has become insolvent.
However, all is not lost. The Australian Taxation Office allows you to write off bad debts(1), meaning you may be able to pay less tax and claim a GST credit.
As the 15-16 financial year draws to close, you only have a few weeks left to follow all the steps required if you are planning on writing off a bad debt.
So what’s the difference between a regular overdue invoice and a bad debt? Much of it comes down to your efforts in recovering the debt.
You must follow these five steps:
1. Issue a reminder notice
2. Contact the client by phone and mail
3. Issue a formal notice of demand
4. Issue and serve a Summons (Claim) and obtain Judgment
5. Commence an action to enforce Judgment
These steps must be completed before 30 June 2016 for you to legally write the bad debt off, and some of the steps are more complex and time consuming than you might think.
If you need help with any of this, contact us now. If it’s a bad debt that we’re unable to recover for you, we’ll get the ball rolling to ensure you follow the right process so you can legally write it off.
|
|
‘SECOND CHANCES’ – ENOUGH IS ENOUGH!
Good relationships go a long way in business.
However, when it comes to recovering what’s owed to you, there’s a danger in placing too much emphasis on the relationship, while your bottom line suffers.
We’ve heard it all before. “They’re a good customer, I wanted to give them a second chance”.
In removing the emotion of the relationship, we quickly realise that they are only a good customer if they hold up their end of the deal by paying you on time, in full.
In our experience, by the time an outstanding debt has been referred to us, the customer has been given three, four or five ‘second’ chances.
Consider this: each time you give your client a ‘second’ chance, your invoice goes to the bottom of their pile.
Collections is all about consistency. If you agree to a payment extension with your client, put the agreement in writing, and then follow up swiftly if the agreed extension date passes. If you gave them a ‘second chance’ last time and they let you down, perhaps its time to take a step back, remove the emotion from the transaction, and have it dealt with by an expert.
‘Hoping’ that your client will come through with payment can leave your business exposed to significant risk.
|
|
TIMING IS EVERYTHING: WHEN IS THE TIME RIGHT TO CALL IN A DEBT COLLECTOR?
Our new debt collection clients often ask us “should we have called you sooner?”
Most of the time, the answer is ‘yes’.
A recent Sensis Business Index survey found almost one in four businesses have been forced to wait more than six months for an invoice to be paid. Manufacturing, construction and wholesale industries are the worst late payers.
It’s simple, really. The longer an unpaid debt is left idle, the smaller the chance of full recovery becomes.
Many people also don’t realise there is a statute of limitations for debt pursuit. Each state and territory has a different period of time where a debt can be pursued and has legislation in place that outlines what happens when the limitation period has expired.
In other words, if you leave an unpaid invoice unpaid for too long, you might not legally be able to recover the debt, even if you have held up your end of the deal.
So when is the right time to refer your unpaid invoice to a specialist debt collector? If your answer to these few questions is ‘yes’, then it’s time to refer the matter to us:
1. Has the product / service been delivered by you as agreed?
2. Is the invoice overdue by more than 60 days?
3. Have you sent the client a reminder, in writing?
4. Have you attempted phone contact with the client to follow up
on the amount outstanding (and kept records of these calls?)
5. Is your business suffering from cash flow issues as a result of the unpaid invoice?
|
|
|
|
|
|