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Don’t let customers have Christmas on you

Make sure you're set up to avoid debt this Christmas with Baycorp's Top Tips - a recent presentation to NZCFI Members.

17 October 2016

As we swing towards summer, it’s an important time to think about credit trends with the biggest retail months of the year looming. How do we ensure customers don’t have Christmas on you?

Speaking at the NZ Credit and Finance Institute Christchurch event, Baycorp Manager of Client Partnerships Victor Jamieson explained that trends show a peak in November/December lending and peak defaults in the 90 day cycle following in March/April. 

He explained ensuring the basics are done right to start with is an important step to avoiding debt - get the full personal details of your customer and the correct legal entity, company, trust, partnership or individual. Before commencing work it’s also important to tell the customer about your terms, credit check those with high exposure and for a personal guarantee, credit check the guarantor too. 

Also make the most of technology to get results – you can email invoices at the time work is done, set up direct debits and send SMS reminders the day before payment is due.

Victor discussed the three main New Zealand Credit Bureaus available to the market for consumer credit checks – Veda, Dun & Bradstreet or Centrix highlighting their various database strengths.

He also explained that using a Debt Collection Agency (DCA) like Baycorp is an effective approach and most charge a small set up fee and then commission on monies collected. No success means no commission and a large portion of the commission is recovered from the customer where T&Cs allow.

A collection agency, such as Baycorp has trained staff, technology with predictive dialer systems and data washing, legal and field services and data science.

If you’re chasing an overdue debt, there’s a likely chance you’re not the only one. A customer with one debt is likely to have six debts.

If another creditor has engaged Baycorp to collect money owed to them, we know that their debt will stand out from the rest in your customers mind.  Baycorp are proud to be New Zealand's most preeminent debt resolution specialist.  Our brand is three times more recognised by customers than our closest competitor. So get in touch today, we would be happy to talk to you about how we can help.

In the meantime, make sure you’re set up to avoid debt this Christmas with Baycorp's top tips:

Terms of Trade
Make sure you have clear Terms of Trade which are communicated at the start of the business relationship, available on your website and/or distributed with your invoices. Ensure your terms allow for the recovery of collection costs which means that any debt resolution charges can be passed on to the customer. We also recommend you allow for a personal guarantee when you are dealing with a limited liability company. 

Start with a credit-check 
Nobody wants to be in a position where they have bad debt so we suggest finding out as much as you can in advance about new creditors. Build a profile – get to know a potential customer before doing business. A common mistake we see is that people don’t check the correct legal entity of a business – make sure to get as much information as you can about a prospective creditor so you can build a robust profile. 

And if you haven’t it could be a good idea to also run credit checks on existing customers in particular, the ones with which the financial exposure to your business is high.

Personal guarantee
For a personal guarantee, credit check the guarantor, not just the principal. If your customer refuses to provide a personal guarantee, at least get approval to do a credit check on the director, trustee etc.

Identify appropriate terms of trade
A simple credit check can protect your business from potentially harmful debt and can assist you to set up terms of trade with clients to mitigate bad debt. It is crucial to match terms of trade to your creditor’s financial health.

Invoice on time
Invoice customers as soon as practically possible. Customers are more likely to pay when invoices are issued accurately and punctually. Send customers timely reminder emails regarding payment terms. The more overdue payments are the harder it becomes to recoup costs.

Take advantage of technology 
Email invoices at the time work is done, set up direct debits, send SMS reminders the day before payment is due.