A note from Pacific Mercantile | Creating a Credit Policy | Effective Collections Techniques | Introducing McDonald Phillips Lawyers Pty Ltd
A note from Pacific Mercantile
The uncertainty and risk has generated by the current economic environment demands careful corporate navigation. However, as in any time of change, the economic downturn presents companies with a mixture of both risks and opportunities.
One risk common to many companies is the size of their debtors’ ledger. During the economic boom many companies regularly extended credit to continually delinquent debtors. These companies are now being forced to reassess their cash flow management practices and address slow paying debtors earlier in the cash flow cycle.
Reassessing your cash flow management is a complex process involving a number of different processes and procedures including:
- Creating a robust Credit Policy incorporating formal credit assessment, invoice design and production and debtor monitoring procedures;
- Reeducating your internal sales and collections staff;
- Reeducating your debtors; and
- Implementing effective collections techniques.
During this time it is critical that clients and suppliers work together as business partners. This newsletter is focused on helping you protecting your existing relationships while increasing your cash flow to ensure you emerge from the current difficult economic climate in the best possible position.
If you have any questions, comments or issues you would like to discuss with us please contact us at sales@pacificmercantile.com.au or call us on 1800 007 886.
A written Credit Policy provides a structured approach to risk management and the debt collection process. It is essentially a consistent set of rules for deciding which of your customers is an acceptable credit risk. Companies who offer credit prior to implementing a Credit Policy may find themselves with large amounts of unrecovered debt.
It is important to design your Credit Policy with the understanding that credit risk may be effectively managed, but not eliminated. Therefore, a successful Credit Policy should address the following:
- When is a credit application required?
- What factors will you consider when deciding whether to extend a customer credit?
- Must a credit application be signed, if so by whom?
- What are your standard terms of sale/credit? Make sure to include: the length of time for which credit will be offered, how late paying customers will be notified, the penalties for late payment and when an account is referred onto an external debt collector?
- Under what conditions will a personal guarantee or some other form of security be required?
- What are the responsibilities of the sales and accounts departments?
- How frequently must the credit files be updated?
- What is the process for escalating problems involving uncooperative debtors?
- When is an account to be placed on hold?
- When is an account to be referred to an external debt collection agency?
- When should an account be referred for litigation?
- Who can accept a payment arrangement proposed by a customer?
- What are your procedures for minimising delinquencies?
- What are your fraud prevention procedures?
- What is the process for addressing disputes?
To maintain a successful Credit Policy, it is important that it is regularly reviewed in conjunction with feedback from your sales and accounts departments.
For assistance on creating a sucessful Credit Policy contact Pacific Mercantile at sales@pacificmercantile.com.au or call us on 1800 007 886.
Effective Collections Techniques
The key to successfully contacting delinquent customers or debtors is good communication. By being confident and prepared you can stay in control of the call and achieve a successful outcome.
Smile. Ensure you maintain a pleasant and confident tone. Smile when you talk on the phone; it is noticeable in your voice.
Speak up. Your voice should be loud enough to be heard and convey confidence, but should never be raised in anger. You want your debtor to hear you and understand what you're saying. Never raise your voice or speak too quickly.
Don’t engage in small talk. Don’t allow your debtor to control the conversation. By staying focused on your conversation and remaining on topic, you maintain control.
Get a commitment. Be courteous, but ensure you get a commitment to pay before you hang up the phone.
Be prepared to handle excuses. For example, if the debtor says the check was sent, ask when it was mailed and where it was sent so you can determine the day it should arrive.
Be positive. Be sure to communicate the benefits of resolving the issue – maintaining good relations or good credit. Never threaten your delinquent debtors.
ARMS regularly conducts a range of debt collection training courses throughout Australia. These debt recovery courses are designed to give participants the knowledge, skill and confidence to collect outstanding debts by utilising successful debt collection techniques while maintaining legal and compliance standards.
To find out more information on our debt collection courses or to discuss tailoring our debt recovery training solutions for your organisation call 1800 007 866 or email sales@pacificmercantile.com.au.
It is important to note that there are many laws and guidelines that must be followed when contacting your delinquent debtors. To learn more about your legal obligations log onto http://www.accc.gov.au/content/index.phtml/itemId/733222
Introducing McDonald Phillips Lawyers Pty Ltd
As a response to our clients’ growing needs, we have established an integrated law firm, McDonald Phillips Lawyers Pty Ltd. McDonald Phillips Lawyers Pty Ltd assists our clients with all relevant legal matters across Australia. The team understands the business environment, closely monitors business trends and draws on a unique blend of experience and expertise to deliver the commercial edge to clients.
McDonald Phillips Lawyers Pty Ltd adopts a practical, solution driven approach to address issues in the most cost efficient manner. They provide a personalised and responsive service backed by extensive industry knowledge, the latest technology and advanced compliance systems.
The driving force behind McDonald Phillips Lawyers Pty Ltd is experienced commercial litigator, Rhonda King. A commercial lawyer since 1981, and partner or consultant to legal practices from 1984, Rhonda has extensive industry experience.
To find out more about McDonald Phillips Lawyers Pty Ltd visit our website www.mcdonaldphillips.com.au or contact us on 07 3016 3290.
Disclaimer: the content of this newsletter is written for educational purposes only and is based on the opinions of the authors. Pacific Mercantile Pty Ltd and its authors are unable to accept any liability or responsibility whatsoever for any error or omission or any loss or damage of any kind sustained by any person or entity arising from the use of this information. Pacific Mecantile Pty Ltd recommends interested parties should independently satisfy themselves as to the accuracy and correctness of the information found within this newsletter.