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Cash Flow Management

I am constantly finding SME type business that have not been paid by their clients.  When we get appointed, we do not go in as the heavy hitting debt collector or arrogantly stating how our client is always correct.  Good debt collection is in many ways more a negotiation and trying to bring two parties together to match up their original expectations that for what ever reason has gone pear shaped.

First rule of Economics – there is a buyer and a seller – and if the selling price matches the buying price then a deal will be made.  In debt collection, the deal has already been made – thus the price agreed.  However, many times it is the buyer not getting what they believed they were paying for or the seller not getting what they supplied.  Obviously there are also many instances of people/companies just not paying due to cash flow issues, poor business practice, fraudulent behaviour amongst other things but most disputes arise around what was agreed to one or both sides has not been happy with the eventual outcome.

I always get my clients side of the story – then I request the paper work.  Many times this is the first part of a story unravalling – from the clients side or you can see why there maybe confusion on the other side.  It is CRITICAL that you have terms and conditions that set out what each parties expectations are, the price, payment dates, amounts and a mediation process if things don’t work out as planned.  After that, you then need an invoice that is CORRECT.  You must have the CORRECT entity (always get the ABN number of the Company that you are dealing with and have it in your T&C’s) plus also have your own ABN number displayed.  Make sure the figure to be paid is correct – including GST – and make sure it is clear.  State what the terms of payment are – and this should agree with the terms and conditions that both parties agreed on and SIGNED PRIOR TO STARTING THE CONTRACT!

When I mentioned this is where it “unravells” above, I am hearing a story of a client who in good faith has gone into an agreement, worked out a price, done the job and not been paid.  There seems nothing strange or any reason to doubt them so I say “have you got a signed contract”?  “I have an email” (that sort of says what I have been told), “we didn’t actually get time to do up any paper work”, “I have known the guy for 20 years so there won’t be a problem”.  It is a business deal that your lively hood depends on.  You need to be dilligent.

When negotiating you need to keep a clear and open mind.  Ask the question as to why that party is not paying or why they have not paid.  No threats – just ask the simple question.  If the person will not discuss it and is avoiding any or all questions, you need to be very dilligent.  It is never a good sign if the other party will not discuss it as history has it they either do not want to pay or can’t pay.  However, if a person starts telling their side of the story, you have to listen – then assess!  Does what they are saying make sense?  Is it feasible?  Could this have actually happened?  Give them a bit of empathy without conceding.  Take notes.  Then if you have the information they require, volunteer it.  If not, politely say you need to get more information as they have made a valid point so you just need to check.  It is amazing how many times when you go back and reassess that you find that part or all of their statement is true – and thus a form of compromise is needed.

If though, as many times it is, just a stalling tactic or a story to try and reduce the figure, stand firm and go back with facts.  Facts and the truth are very difficult to argue with and coupled with executed terms and conditions, a good demand letter and good process, unless they do not have any money you are always going to be travelling on the high ground.

But get those terms and conditions and get them SIGNED BEFORE you start what you are going to do.  If you are not comfortable chasing your money or negotiating these things through, I am happy to help.  If you need assistance, contact me at www.collectionconsultancy.com.au and ask for Greg 0401414123

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