Home – New Forums Money matters First non-payer and continuing business relationship?

  • This topic is empty.
Viewing 11 posts - 1 through 11 (of 11 total)
  • Author
    Posts
  • #996867
    Shackleton
    Member
    • Total posts: 17
    Up
    0
    ::

    It had to happen and have my first non-payer. To be exact he is paying the invoice but in bits and pieces. There is $500 left from an invoice which is 4 months overdue. How do I continue the relationship whilst protecting myself?

    I’m lucky is that the industry where I work is usually composed of very decent people and issues are less frequent than in most other industries. While my terms are full payment before delivery, in this case the client needed the goods ASAP and had already paid 50% so I sent them off with a promise from him of payment the following week…. There is more background but for the sake of brievety I will not include as it’s not really pertinent to my query.

    Firstly, this is a second generation family business which curiously is operating as a sole trader. Given the size (and risks) of the business I would have expected a pty ltd company to protect this person’s assets. Previously there was a pty ltd company but it was deregistered around the same time the sole trader status came into being. I can’t find the reasons for it being closed. Could reverting to a sole trader status mean he has been banned as a company director?

    Secondly, for various reasons I would like to continue a business relationship with the person, however I need to protect my business. I know he has at least some minor assets which would cover the cost of a default but I am unsure how I can request that he provide one of those assets as a guarantee? To give perspective future orders will be between $5k and $15k.

    Creating a guarantee will certainly involve additional paperwork and some legal advice to myself …costs and time which would only be covered in a contiuing business relationship.

    Thirdly, the products I’ve sold to him have been incorporated into a larger project for one of his customers. If he doesn’t pay do I still retain ownership of those products despite being sold onto a third person and integrated into the larger project?

    Cheers

    #1209329
    tfowler
    Member
    • Total posts: 25
    Up
    0
    ::

    Hello Shackleton,

    Your main concern seems to be to cover your business from potential loss while still having the opportunity to recover assets/payment should the debt go bad.

    The best way to do this is to have the appropriate terms and conditions in place.. to be able to recover personal assets from owners/directors a personal guarantee should be included (and the T&C’s signed by the director/owner). the danger here is that his assets could cover your debt, but also countless others, and there may not be enough to go around. I have seen many guarantees, some can fill a page or two, but to be honest, you only need a couple of lines that state that ‘the undersigned agrees to be personally liable for any debt incurred” (get legal advice on the correct wording – but you get the idea).

    To retain ownership of your goods you need to have registered your security under the PPS legislation, as simply having a Retention of Title clause is no longer sufficient. You must also have this in your T&C’s and the customer agrees to it by signing, and you cannot register without their approval. Also, your goods need to be easily identified as yours… and it depends on what the larger project is as to whether you still have a right to your product even after the registration – if its for home construction for example, you would have an issue.

    If your customer has not signed a supply agreement or credit application, I would suggest getting them to do so before you supply further. It could be a good time to get your terms reviewed to give yourself as much protection as possible.

    If you would like to chat further, please don’t hesitate to contact me 0408 233 265

    cheers

    Tracy

    #1209330
    Shackleton
    Member
    • Total posts: 17
    Up
    0
    ::

    Hi Tracy, thank you for your quick reply. Your explanation made it easy to understand for a novice like me :)

    I think for the volume, product type and how they are incorporated into larger projects means that it would be easier and better to seek a personal guarantee than using the PPSR.

    Cheers

    #1209331
    Paul – FS Concierge
    Keymaster
    • Total posts: 3,488
    Up
    0
    ::

    I feel your pain.

    If you feel you could have an honest discussion around why the payment is late, it may help you to plan your future relationship + strategy with this customer.

    Persistence is key when chasing payment – my partner in a whole other league – does not sleep at night until every last cent is paid and over the last 18 months, has chased down debts of 2K, 4K and 2K including the balance of the 4k debt which was paid yesterday after remaining outstanding for 359 days.

    #1209332
    bb1
    Participant
    • Total posts: 4,485
    Up
    0
    ::

    Lets be honest here, sure have T&C’s and directors guarantee’s, and any other form of documentation you like.

    If the business just does not want to pay, you have no chance in realty of recovering a $500.00 debt with out it costing you more $’s and headaches.

    I am not saying don’t have them, do have them.

    In this case 4 months is way over the realistic time frame, send it straight to your debt collector (happy to recommend one), don’t let them drag it on.

    I am not saying don’t have them, do have them.

    My suggestion don’t supply another product to them until they cough up your hard earned $’s. The write them a polite letter stating you are no longer in a position to provide services or products to them without a 100% upfront payment, or else you need to cut the arrangement.

    once a bad payer always a bad payer.

    #1209333
    James Millar
    Participant
    • Total posts: 1,739
    Up
    0
    ::

    100% agree with Bert. The appropriate supply agreements may technically offer you protection and security but the process and cost required for enforcement is substantial to say the least. If they don’t respect your terms then they don’t respect you or your business. Nothing good comes from a relationship that doesn’t have mutual respect. Business or personal.

    Helping build better businesses and better lives with expert financial and taxation advice. [email protected] www.360partners.com.au 03 9005 4900
    #1209334
    mikeoda
    Member
    • Total posts: 13
    Up
    0
    ::

    It’s annoying when erstwhile valued customers stiff you for payment.
    I’ve found it’s good commercial practice to periodically politely remind all account customers of your terms of trade. Not just a highlight or sticker on invoices or statements (which get treated as wallpaper after a while), but as a separate, stand-alone message.
    Then they won’t get all bent out of shape when you start asking for settlement of overdue accounts earlier rather than later.
    Good luck with chasing it down – don’t let them off the hook EVER.

    #1209335
    Shackleton
    Member
    • Total posts: 17
    Up
    0
    ::

    Thanks for all your responses, all very useful.

    To be clear there is $500 left to pay from a $4000 invoice…T&Cs help manage things but if a customer doesn’t want to pay then they are of little benefit until they can be enforced which is through court or eventually a debt collector. Both of these will be inefficient given the amount of extra work on such small amount.

    Anyway the main purpose of the post was to discuss how a business relationship can be continued whilst ensuring protection. It seems a personal guarantee would provide more security. Obviously if such a guarantee has been given to multiple people/business against a limited in value asset then there may be little to recover. In any case I don’t plan to sell him more goods without some cash payment (on top of the outstanding $500) and guarantee.

    It’s tricky for me as he is well known in the industry (second generation business) and can do a good deal to help promote my business/products …or if he wishes demolish my business/products. He may well just be having temporary liquidity issues so if I can support him while ensuring my own protection it could be beneficial for both us.

    #1209336
    Shackleton
    Member
    • Total posts: 17
    Up
    0
    ::

    I thought I would update this thread by advising that the invoice is fully paid.The client has also paid an additional amount as partial payment (about 30%) on a yet to be confirmed furture order. I’m fairly satisfied that this is a cashflow issue and they don’t intend to not pay.

    The client however is still asking for terms and has pointed out that another supplier provides 30-day end of month terms. At this stage I’m not comfortable with providing terms and think I have a good argument. My products are very price competitive and are in stock so available immediately.

    Thanks for the previous advice.

    #1209337
    mikeoda
    Member
    • Total posts: 13
    Up
    0
    ::

    Good for you Shackleton.
    Persistence pays off.
    And most importantly, you’ve preserved the trading relationship rather than burning it by sooling lawyers & debt collectors on to your customer.
    What I’ve done sometimes with ‘wary’ accounts is require my cost component to be paid immediately on supply/completion (say 70% of quoted price), then the balance (ie my profit component) within 30 days.
    Would this kind of arrangement work for you and your customer?

    #1209338
    Shackleton
    Member
    • Total posts: 17
    Up
    0
    ::
    mikeoda, post: 250252, member: 98391 wrote:
    What I’ve done sometimes with ‘wary’ accounts is require my cost component to be paid immediately on supply/completion (say 70% of quoted price), then the balance (ie my profit component) within 30 days.
    Would this kind of arrangement work for you and your customer?

    It’s a good idea and something I’ve been considering. I’m not keen for the time being though as it took four months to get the oustanding amount. I want to avoid spending my time that way instead of generating sales and dealing with all the other admin.

Viewing 11 posts - 1 through 11 (of 11 total)
  • You must be logged in to reply to this topic.