1. Boil it Down – reconcile all the money you are owed and get it down to a single number. This has impact and will grab your debtor’s attention. It also gives you clarity. Too often debt is presented with a list of invoices and statements. That weakens the message. The focus needs to be on that one number – the total owed.
2. Demand Once Only – a Letter of Demand is a useful tool but the big mistake is sending out one every month, or even every week. This is your line in the sand and you should send it only once. In the letter, state that this is the first and final notice. This letter is where you bring in the single amount you are owed.
3. Down Tools – a car does not run without petrol. Your business is the same. It does not work without money. No money, no work. Never be afraid to cease work if you are not being paid. Withdrawing labour is the strongest thing you can do to give your debtor a moment of pause to reconsider the payment issues. If you pull this move out early, it will send a strong message and is often the way to get paid quickly.
4. Watch the Work Value v Payment Value Gap – on any job there is the value of the completed work and the amount you are paid. They should be the same amount. Our business culture is a ‘work first payment after’ culture. But that does not mean you give your client the full value of work upfront and then chase your money. Keep an eye on the value of work done and ensure that the value paid is not too far behind. The reason many businesses go under is because they let the work value run miles ahead of the amount paid. Keep those numbers as close as possible and if work value gets away from you, then suspend work.
5. Choose the Field of Battle – there are a number of choices to have payment disputes decided. Of course, there is court but there is also alternative dispute resolution such as mediation, expert determination, also the Civil and Administrative Tribunals. For construction debts there is Security of Payment Adjudication and Mercantile Agents/Debt Collectors. You should get to know these avenues and what debt suits each.
6. Take Control – do not be afraid to commence action in the forum of your choice. Here is where most businesses chicken out or walk away. It’s your money. Go get it. It is likely your debtor has never been put through any of these recovery methods and so will be feeling anxious and in unfamiliar territory. That is your advantage. If you’ve done your homework you will know what is going on. You’ll have your paperwork ready and your case prepared. Remember all the early morning and hours of work you did that you have not been paid for. That should spur you on to get in there and have it out in whichever dispute resolution method you choose. Just don’t be afraid to get into the fight.
7. Smart systems – many small business owners are so heads down, they often live with out-dated systems that no longer serve them. For example, do you have ring-binder files stuffed with paperwork? Do you have the latest software to track time sheets? Have you upgraded your accounting systems or are you staying up late to sort invoices and punch in the numbers manually? Even if you can’t afford to outlay for new systems now, you can research the best options and make a plan for the future. That way, when the cash flow normalises, you’re ready to optimise.
Last year, Anthony Igra and his team at Contractors Debt Recovery recovered more than $6 million in monies owed to small businesses enabling his clients to pay wages, bills and keep on trading. For further information, visit: www.contractorsdebtrecovery.com.au; call: 1300 669 075.