Kearley Lewis: Experts in Commercial Debt Recovery

If you have visited our website recently, you would have noticed a link to the “Lewis Holdway Community.” Follow that link and you are taken to a new page outlining the organisations that our firm is associated with. The longest standing association is the one we have with Kearley Lewis mercantile agents. The two organisations boast a successful trading relationship spanning 23 years. We are proud of our association with Kearley Lewis and in line with our commitment to reducing the cost of using law, our firm supports the work of Kearley Lewis by offering (as best as possible) their clients fixed-fee legal work on debt recovery files that are escalated to legal action.

In this article, we hear from Julie Lamers the General Manager of new business from Kearley Lewis about the importance of debt recovery for your business. Its sage advice for our business-owner readership and we encourage you to contact Julie for a discussion about how Kearley Lewis can benefit your business. You will find that the debt recovery process through Kearley Lewis is easy and surprisingly affordable.

Keeping your Cash Flow Healthy

By Julie Lamers

We’ve started the new financial year and many of our business customers take the opportunity to review their debt collection processes and procedures, to ensure they maintain a healthy cash flow and minimise potential bad debts throughout the new year.

When your business is winning new business, it’s great for your P&L but if you don’t follow up your invoices and get paid, it’s not great for your cash flow. If nothing else, this makes debt recovery critical to your business if your invoices do not get paid on time.

Taking care of Business: the role of debt recovery for your bottom line

As a business owner and operator, some obvious questions to ask yourself about following up your invoices are:

Do you need to review your credit terms or invoice frequency?

You may or may not have standard credit terms that you offer your customers.

How promptly do your customers pay against their credit terms and does this payment cycle work for the cash flow of your business?

It may be that you need to think about having shorter credit terms so that you are paid more quickly.

Similarly, you may also wish to look at how frequently you invoice. If you invoice monthly, would it be beneficial to your business to invoice weekly? The sooner you invoice for the goods or services you have provided, the sooner you will get paid.

Follow up your sales invoices

Follow up your customers by calling them to confirm delivery or satisfaction with the goods or services you have provided; if there are any reasons that could give rise to a dispute, find out early and not when payment is overdue. The sooner you resolve any issues, the sooner you will be paid.

Stay close to your customers, ensure they are aware of your terms of trade and from the start, ensure they know that you chase up your invoices promptly. Those who shout loudest get paid first!

Also watch your customers carefully if their payment patterns drop away or if third parties or different parties are paying their invoices for them. Any anomaly in the usual business relationship should trigger questions by you because you may need to put them on alternative payment terms. Operating prudently avoids having the argument about liability later on, and gets you paid sooner.

Do you need to review your terms of trade?

Do you have a clause in your terms and conditions that allows you to recover your debt collection costs back from your debtor in the unlikely event that they do not pay?

If you do incur costs, you want peace of mind that you can recover those as well as the debt.

There are many clauses that can assist in the speedy recovery of your debts, they include of the following:

• Caveat / charging clause
• Jurisdiction clause
• Cost clause
• Security interest clause under the PPSA (Personal Property Security Act)

Taking care of Business: impacts on your top line

Monitoring invoice payments and activating the debt recovery process is also important because of its ancillary affects to your business as a whole. Here are two common considerations that our business readership should turn their mind to:

Should you review how you manage your own creditors?

It’s vital you closely manage your own creditors. Maintain your cash reserves by taking full advantage of the payment terms offered by your suppliers and paying on the last day, or ask for discounts for early payment.

Review your stock and supply chain because although buying in bulk can appear attractive you need to factor in the costs of storage and insurance and be confident that you will be able to sell the stock, as you could run the risk of tying your cash up in slow moving stock.

When it comes to meeting your GST and PAYG commitments, rather than paying in lump sums, consider saving as you go by transferring money into a separate account. Don’t be tempted to use this money, instead review your invoicing and collection procedures to speed up your debt turn.

Adhering to the terms of your credit insurance policy

If you have credit insurance in place, this could protect your cash flow from the impact of not being paid if one of your customers ceases to trade; although it won’t indemnify you for the future loss of sales this customer would have generated.

Failure to adhere to the terms and conditions of your policy could mean that you will not be insured, and all too often this is not realised until a claim is made. Ensure that you follow the policy conditions in:

• setting up new customers, so they are covered by the default limit on your policy or by a customer specific limit you have requested. Often there are certain searches, checks and balances that you need to have undertaken in order to obtain a limit
• following up your customers for payment
• advising your insurer when your invoices are overdue for payment, in line with the reporting requirements, for example when they become 60 days past due
  

Look to the Future

When a business fails, it is easy to look back with hindsight and see where things went wrong. When you are in the throes of your day-to-day work, however, it can be easy to miss the signs that all is not well.

The key to financial health is to spot problems before they become too big to solve. A business that prepares cash flow forecasts is more likely to be able to see problems on the horizon and put plans in place to get things back on track, than a business who does not.

Any business owner that will one day be looking to sell their business, needs to borrow from a financier, or attract private investment, will find their business is far more attractive when it can be demonstrated they have a good handle on their cash management.

In many ways, Kearley Lewis is able to be an important business partner to the day-to-day practice of your business. I look forward to speaking with you about how we can fit into your business.

Kearley Lewis specialises in providing ‘business to business’ debt collection services directly to businesses. They work alongside Lewis Holdway Lawyers which provides commercial legal services and experienced Law Clerks undertaking the telephone collection services.

They have excellent recovery rates and highly competitive fees. They also offer a range of commercial services Australia-wide including credit checks, payment defaults, company & business searches, title searches and credit applications.

If a business is supplying goods or services to any industry throughout Australia, Kearley Lewis can assist with the recovery of outstanding debts. Their highest source of new business is referrals from existing customers and business partners.

If you would like to talk to Julie Lamers about how Kearley Lewis can assist your business with their debt recovery, please contact her on (03) 9629 8777 or visit the website on www.kearleylewis.com.au for more information.