Is Your Business Ready to Extend Credit?

shutterstock_144997780As your business grows, the question of whether to extend credit to your customers will inevitably arise. There are certainly many advantages to doing so. For example, according to many experts, extending credit can increase your sales by as much as 50%, depending on the industry you work in.

Credit can also increase repeat business and attract a whole new class of customers who prefer to pay on credit in order to conserve their cash. Additionally, it can help to create goodwill with trading partners and foster good relationships with customers, making them less price-sensitive and more focused on the services you provide.

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11 Questions for Choosing the Right Debt Collection Agency

shutterstock_124086634There is no hard and fast rule for when a business should consider passing its outstanding debts on to a collection agency. For some businesses it is when unpaid invoices go beyond 90 days, while others make the decision when the cost of collection exceeds a specific value.

Whatever the time frame, unless you have a highly efficient in-house collection department, there will inevitably come a time when you have exhausted all other avenues and must either write a debt off or give it to an expert to pursue on your behalf.

Should you get to this point and consider hiring a debt collection service, there are 11 questions you should ask potential candidates that will ensure you choose the one that is the best fit for your needs.

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The Decision Every Accounts Payable Department Must Face: To the Cloud or Not?

clclA company’s Accounts Payable (AP) process is often viewed as a secondary function to Accounts Receivable (AR), but AP is still vital for a business to be profitable.

  • If carried out efficiently, AP contributes to cash flow by minimising the number of late payment penalties, interest charges and lost discounts that are incurred if payments aren’t made promptly and consistently.
  • Efficient AP maintains good relationships with suppliers, which is vital for the smooth running of a business. If suppliers are not being paid on time, they soon lose confidence in a business and become reluctant to deal with it.
  • A well run AP department gives a business a clear view of its finances on a day-to-day basis.

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5 Reasons Your Business Will Improve Today With a Debt Collection Strategy

image4No matter the industry, debt collection is an essential part of business. The proportion of overall revenue that is written off as bad debt is significant. .

A comprehensive debt collection strategy will ensure your business maximises return for efforts. Below are the main reasons for having a comprehensive debt collection strategy in place.

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Are You Throwing Money Away by Chasing the Wrong Debts?

image1Every Accounts Payable department knows that there are two types of debtors: those who won’t pay and those who can’t pay. Identifying where your debtors lie will save you a great deal of time and money when trying to recover debts.

Won’t Pay vs. Can’t Pay

If a client won’t pay, your debt collection efforts are likely to have little or no effect. Your best recourse is to hand the matter over to a professional debt collection agency and pursue legal options.
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Is Your Business in Danger From the Legal Risks Involved in Debt Collection?

image3Chasing clients for unpaid bills can be extremely time-consuming, stressful and, if done incorrectly, legally risky. The easiest way to protect yourself and improve the likelihood of the debt being recovered is to always use a reputable debt collection agency. Should you opt to attempt to recover your own debts, you need to be aware that you comply with Australian laws relating to consumer rights and privacy and also those governing debt collection practices.

Contact laws

Debt collection activities must be carried out in accordance with a range of strict guidelines. You ought to refer to relevant legislation and codes of practice to obtain a full understanding of your obligations. Some of the requirements are :

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How to Collect Your Debts Through The Courts

If you have exhausted all other avenues trying to recover a debt that is owed to you or your business, you may want to explore the option of collecting the debt through the courts. Obviously, it will depend on the amount you are owed, but attempting to gain a judgement from a court of law can be a highly effective course of action.

Once you have obtained judgement, the amount awarded by the court must be paid by the debtor or else they will face serious legal consequences. Where final demands and solicitor’s letters might have failed to sway your debtor in the past, a judgement from a court gives you the legal power to enforce your claim.

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Drafting Debt Collection Letters That Get You Paid

As recovering debts in an efficient manner saves you time, money and stress, drafting effective debt collection letters is an important part of your business processes. The difference between letters that fail and those that succeed could be the difference between your business working in the red or the black.

But before discussing what a good debt collection letter should contain, it’s important to cover what it should never include. The constraints of privacy and debt collection laws require that your letter:

  • Does not contain anything that could be construed as harassment (this includes the frequency of your letters)
  • Is not misleading (i.e. stating consequences that will not happen)
  • Does not embarrass, frighten or intimidate the debtor.

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Overview of Credit Reporting Code of Conduct

From March 2014, a new Credit Reporting Code of Conduct will replace the existing Credit Reporting Code of Conduct drafted back in 1996. The change is part of the government’s recent reforms of the Privacy Act.

What is the code?

The Credit Reporting Code of Conduct is a mandatory code enforceable by law, with penalties of up to $1.7 million for breaches. It requires credit providers and credit reporting agencies to adhere to a set of rules relating to the collection and disclosure of credit information.

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Credit Reporting Changes in Privacy Amendment (Enhancing Privacy Protection) Bill 2012

Until now, a credit report in Australia has been similar to a criminal record. Reports only recorded negatives, which can remain for between five and seven years, regardless of whether the credit history has improved in the meantime. New amendments to privacy legislation are set to provide a more comprehensive view of credit worthiness.

New amendments

Amendments to the credit reporting requirements in the Privacy Amendment Bill 2012, due to take effect in March 2014, will now mean that credit reporting agencies can also record positive records in a credit report. This will allow a more balanced view of a credit history and the ability of an individual to repay their debts.

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