A note from Angela
Optimum Recoveries celebrates our 11-year anniversary this month and it’s been interesting to reflect back to when we first launched – just after the GFC. Now in 2020, we’re again watching and waiting to see how recent events will impact Australia and the rest of the world. It seems very fitting that the traditional anniversary gift for 11 years is steel for strength and resilience – something we might all need in the coming months!
Just what the devastating natural disasters and the onslaught of Coronavirus all means for our economy, business activity and our communities is scarily unknown.
I presented on this topic at Queensland Leaders this week as part of a small panel discussion where I shared current and practical information informed by the latest business surveys. Some key stats are noted below, but if you’d like to receive a summary snapshot of what I covered in this presentation, please contact me.
While this is a ‘watch this space’ situation, the important message is to keep calm and carry on! Continue to be vigilant with monitoring your new and existing customers for any warning signs of business distress, make sure your terms and conditions are watertight, and watch that your payment terms aren’t being stretched out.
In this edition, Optimum’s Helen Dickson shares her tips for speeding up your debt recovery process, and we have two informative articles – the first article is in response to a recent increase we’ve seen in clients being the victims of credit card payment chargebacks and outlines what you can do to reduce the risk, and the second weighs up the pros and cons of Magistrates Court over QCAT.
A reminder too that Optimum’s newest team member, Debbie Harris, is available to expertly manage your collections. If you’d like to reach out to her for advice or to discuss your account, contact her via email or call her on 07 3166 8888.
Until next time,
Angela
What’s the state of play for Australian Businesses?
At times like this, it’s important to keep your finger on the pulse and benchmark your cash flow position against the market. We regularly review the data provided by Xero and CreditorWatch. Here are some key stats just released.
Cashflow (Xero Small Business Insights)
50.86% of Australian businesses were cash flow positive in January 2020.
Getting paid (CreditorWatch)
57 days is the average number of days for an Australian business invoice to be paid on 30-day terms.
Slowest paying industries (CreditorWatch)
• Rental
• Hiring and real estate services
• Construction
Want to recover your debt faster? We do too!
Here’s how you can improve your collections results.
By Helen Dickson
We love nothing more than swinging into action and recovering what’s rightfully yours. Knowing that we can help a business recoup a debt and improve their cashflow is what makes us tick. It’s what gets us out of bed the morning and keeps us doing our office happy dances with such enthusiasm!
While we have the expertise, proven strategies and highly developed processes to maximise debt collection results, there are some things that we must rely on you, our client, for.
Unfortunately, we are sometimes provided with incorrect or insufficient information about a debt and this can not only cause significant delays to the recovery process, it can have other damaging ramifications for us, as well as our client. In the debt collection space, accurate and complete information is gold!
What we need from you to make debt recovery faster and more streamlined.
1. True and correct details of any outstanding invoices and a current statement
This might sound obvious but making sure the debt is correct, due and payable is the first step. We’ve had occasions where a debt has been referred to us for the original invoice amount, but credits issued or part payments received have not been disclosed. If we pursue the incorrect debt amount with the debtor, it not only starts the negotiation process off on a negative foot, it can also cause recovery delays.
2. Correct contact details for your debtor
It’s imperative that we have the full details of who the debt belongs to so that we can crosscheck we’re dealing with the right entity. Specifically, we need:
- The company name
- The business or trading name
- The contact person’s full name (and any known aliases)
- A.C.N. and/or A.B.N.
- Full mailing address, including postcode
- All known phone numbers, including mobile
- Email address
3. All supporting documentation, including contract and T&Cs
All contracts, terms and conditions, purchase orders, credit applications, proof of delivery records etc must be provided to us at the start of the debt recovery process. This is all vital information that will help us achieve the best result for your business.
4. Details of previous correspondence
Any correspondence between you and your customer about the debt before it has been referred to us should also be supplied to Optimum. Knowing what has been outlined, agreed to or disputed is valuable information for us to work with.
5. Any other relevant information about the debtor
The more details you can provide, the better!
- Have you had a previous dispute with this debtor and what was the outcome?
- Has the company become insolvent?
- What guarantees and securities are in place?
At the request of some of our clients, we are currently developing a ‘How to Refer a Debt’ Fact Sheet to help you prepare all relevant information in advance. If you’d like a copy when this is finalised, let us know.
With online payment chargebacks on the rise, businesses can’t be complacent.
At Optimum, we’ve seen a spike in businesses that have unfortunately been stung by credit card payment chargebacks. This has particularly impacted clients who supply to the food services industry. In CreditorWatch’s Business Risk Review for Q4 2019, this industry was highlighted as one to watch, because average payment times had stretched from 52 days to 72, equating to a 42% increase.
In the following article, we outline what steps you can take to reduce the risk of being a victim of chargebacks.
More and more businesses are accepting payment for goods or services via credit card or an online payment portal. But what happens if a purchase is disputed? Unfortunately, the financial institution usually reverses the charge, leaving the business not only empty-handed but out of pocket for chargeback fees of up to $100!
Chargeback policies exist to protect financial institution customers from credit card fraud. Financial institutions understandably want to protect their customers from this risk, and they also want to keep their business customers happy so they don’t switch providers. For these two reasons, they’ll more often than not issue a chargeback if their customer disputes the transaction for common reasons such as:
- They claim they didn’t receive the goods or service;
- They claim the good or services received were different from what was expected;
- They don’t recognise the business name on their credit card statement;
- They claim they’ve been incorrectly billed.
Here’s what you can do to help protect your business from chargebacks:
1. Use a clear payment descriptor
Make sure the transaction details that will appear on your customer’s credit card statement will be instantly recognisable. If they are used to dealing with you by your trading name, don’t list your entity name on the transaction. This can easily cause confusion and prompt a dispute.
2. Ensure a signed contract is in place
This is a critical step to reduce your risk of chargebacks. Ensure you have your customer’s authorisation in writing before the goods or services are delivered so you can prove they agreed to the terms and conditions of sale in the event of a dispute. Also, make sure you have correctly verified who the cardholder is so you know exactly who you’re dealing with. Set up a protocol to obtain another form of identification such as a current drivers license for every cardholder that purchases from your business.
3. Deal with any disputes quickly
If a customer disputes an online charge through their financial institution, your business will be notified and it’s important to act fast. Don’t sit on an issue. Provide the bank with your documentation immediately so that the issue can be resolved promptly and your business won’t be out of pocket for a long period of time.
If you need assistance to set up and implement the right protocols to avoid the risk of chargebacks, we can help. Contact us for tailored advice.
Court versus QCAT. What’s the best legal action to recover a debt?
If you’re a small to medium business that needs to commence legal proceedings to recover an outstanding debt up to $25,000, you might think that QCAT is your best course of action. Most business owners assume that the QCAT is a cheaper, faster and less formal process than appearing before a Magistrate’s Court. But this isn’t necessarily the case. Here are three reasons why:
- If you bring a case to the QCAT, you must bear your own legal costs, with the exception of the prescribed filing fee. If the proceeding is heard in the Magistrate’s Court of Queensland (Court) however, legal costs are usually awarded in full or part to the successful party.
- Whilst a Solicitor can assist you to prepare your application documents, they can’t represent you in the QCAT proceedings (unless the interests of justice require otherwise). You will be required to represent yourself throughout the proceedings, and this can be quite a daunting and overwhelming experience for some.
- The QCAT is not bound by the rules of evidence and its Tribunal Members can, therefore, inform themselves as they see fit and make decisions if they consider they have sufficient evidence.
In some instances, the QCAT can be the most appropriate forum to deal with matters under the threshold of $25,000 in an accessible, economical and informal way, however, don’t completely discount commencing legal action in the Court. Depending on the type of matter, the parties involved, and your credit documentation the Court process may enable greater recovery to you (i.e. legal costs if you have a costs recovery clause). It can also relieve some of the stress associated with legal action as your Solicitor will be there to represent you throughout the entire proceedings.
For expert advice about whether QCAT or Court is best for your specific situation, talk to your Optimum Collections Manager.
