How To Collect Business Debts (Part 1)
...... you sound like you were lying about some things! At least, he made out that what you did or said could have been interpreted another way. All this takes two days in court.
Ah, but you win. Judgment and costs are awarded to you. At this point, the word 'costs' has an intriguing ring. You take it to mean the enemy will have to pay the $6200, plus all the money you'll now owe your own lawyer. (Two days in court. It doesn't bear thinking about.)
By and by, you get a bill from your lawyer for $4840. And find out you're entitled to recover $3220 from the loser. It's what the court scale allows. So you are down quite a bit. Your legal costs are $4840, minus the $3220 owed by the debtor, plus the old legal bill for $465... whoops, not to forget the smaller one for $120. Altogether, you've had to fork out $2205 to collect $6200!
Anyway, you've taught the enemy a lesson. No one can mess around with you! You'll even go into the red, and spend lots of time and worry, to punish anyone who tries to cheat you.
Choosing A BankIt is important to select the right bank. Do NOT choose any bank -- be fussy! There are two main objectives to seek when searching for a new bank ..... Except there's one problem. When do you get your check from the debtor? ($3220 legal costs, plus the $6200.) He lost, the court ruled in your favor. Surely, he now has to pay at once?
Your lawyer explains that you have a 'judgment'. This means there's no longer any argument: the debtor owes the $6200, as well as the legal costs the court has awarded you. But now you have to enforce the judgment. If the debtor doesn't just hand over the money, you have a couple of options, explains your calm lawyer. One, you can send in the sheriff and he'll seize furniture and other assets the debtor owns. Or you can put the company into liquidation -- but then any other creditors will join in and you'll have to share the spoils.
The sheriff sounds like the best idea. The debtor's computer, for example. Even if it really was broken, it still must be worth quite a bit. And there must be lots of other stuff in that office.
So your lawyer issues a warrant of execution, instructing the sheriff to seize assets to the value of $9420.
Many weeks pass, then your lawyer phones to say the sheriff has reported there are no goods to seize.
"What!" (And that's the beginning of wisdom.)
"Unfortunately," your lawyer explains, "Everything was encumbered. The computer and everything was leased. The company didn't really own anything. There was nothing the sheriff could seize. The company is just a shell, really. So it wouldn't do any good to put it into liquidation either."
Result: your $6200 'sale' has cost you $5425 in legal fees.
The Inside Secrets Of Credit RepairThe information on this disk has saved many people a lot of money. This disk is a guide to repairing your credit. Even if you have A-1 credit, ..... The following chapters tell you much better ways of coping with all this.
2. How to avoid problems - cheaply
First, check them out
IT IS ridiculous for anyone smart enough to be in business not to make routine credit checks. There is no point chasing a debtor with a summons if there's nothing there. You'll get plenty of 'legal action' -- but you'll pay for it all yourself. The debtor won't be touched. Look under 'Credit Reporting Services' in the Yellow Pages. Call a couple of these services. Get their literature. Then join one. You pay an annual subscription (in the very low hundreds) and a small fee each time you want to find out about someone (whether a person, or a business). And I do mean a small fee: less than $10, usually.
Tele-TerroristsDon't ever allow tele-terrorists to bully you. The only way debt collectors that .....
On an individual, you can get information like this:*
(a) Driving license number and date of birth.
(b) Name of employer, and previous employer.
(c) His address, address before that, and before that.
(d) Companies he is a director of, and former companies.
(e) Credit services, banks etc. that have been inquiring about him, and when.
(f) Any writs and summonses served, and whether he has had any court judgments against him.
(g) Default information, including written-off accounts and accounts referred to a collection agency.
(h) Which mercantile agents have made inquiries about the person.
* At least in August, 1990, when I'm writing this. The Privacy Amendment Bill is still smoldering in Federal Parliament. If it ever passes in the form it's in, this might change the sort of credit information you can lay your hands on. But I don't believe a strong form of the Bill will last long. Businesses need information on people who apply for credit. They will get the information somehow. If businesses can't do credit checks through someone like CRAA, then no doubt they'll find another lawful way. Find out how other businesses do it, then do it too.
On a company, you can get information like this:
(a) Trading address and registered office.
(b) Incorporation details, issued shares and paid capital.
(c) Details of directors.
(d) Writs and summonses served and outstanding court judgments.
(e) Default information, including written-off accounts and accounts referred to a collection agency.
(f) Which mercantile agents have made inquiries about the company.
So if someone who asks you for credit is in financial trouble, you'll know it before you start doing business. You can tell him: sure, send us the $6200 and you can have the (whatever it is). If he huffs and storms and threatens to take his business elsewhere, let him. Let one of your competitors have the loss. Now I realize it's easy to say, "Keep your credit tight". I know the temptations. The sales staff are selling, selling. Maybe business isn't too good, and you really want this sale. But I repeat: the easy way to get difficult debtors to pay is never give them credit to start with. Money up front, or no sale.
But even if your credit checks are squeaky tight, you still won't avoid all problems. A debtor can 'go bad' for a hundred reasons. He can be a first-rate customer for years, then something slips. Instead of paying in 30 days, all of a sudden he drifts out to 45 or 60. Or maybe a check will bounce. Or something else that's not just quite normal. This should start to ring little bells. You should find out what the problem is. Use your credit reference agency. If that doesn't show any ominous signs, then phone the customer. You're entitled to find out what's happening -- you're providing the customer with credit.
The customer might say, "Accept things as they are, or we'll go somewhere else." That can put you in a quandary. Maybe he's spending $10,000 a month and it's an account you don't want to lose. But really, you might go for three months without getting paid. Maybe $30,000. And if he doesn't pay in the end, it means you might have to find $300,000 in new sales to make it up.
I urge you to get this credit checking right before you worry about the rest of the things in this book. You can stop reading right here, and do very well for yourself if you just do that. Better than many businesses, I can tell you.
Another suggestion: treat your sales and credit people as equals. Pay them the same, push them the same. Invite your credit manager to some of your sales meetings. If your credit manager has guts, he might say something like, "You bastards out there make the sales, but I can't get the money. Don't you eyeball them? Look, so and so is paying on 90 days now. Is he earning a quid? Or is he slow as hell out there, with no contracts? Is there lots of stock around? Let me know. You might try picking up a check too, next time you're there."
Then get it in writing.
THE MORE you get in writing, the stronger your hand will be if the debtor goes bad. If you have to go to court, your case will be tight. (But usually, with lots of signed documents in your hands, you probably won't need to: the debtor will realize his position is too weak.)
I know this isn't a popular topic. All that paperwork hassle -- for what? It feels like driving with the brake on. But I wouldn't be doing you a favor if I didn't at least mention 'credit management' (the right term for a system for checking out your customers, and keeping all the documentation straight).
How much documentation you use -- and what sort -- depends on the size of your business, how much bad experience you've had with debtors, how much you know about credit management, how tolerant your customers are about signing papers (including directors guarantees), and a hundred other things. But whether you know it or not, you already have a credit management system: it might be good, or less good, or downright lousy -- but it's there.
You may be relieved to know that I'm not going to mention anything else about this topic. (As I said, I've found that people really don't like to hear about it.) But that doesn't let you off. If you get your credit management wrong, it will come back and thump you. If you get it right, you'll get your money almost every time. But to get it right, you may need help: if you feel shaky on all this, you can join the Australian Institute of Credit Management and let them help you.
Simple Ways To Collect A Debt Yourself
LET'S SAY you've got a bad one. The money is way overdue, you've called a few times -- now you're convinced it isn't going to be easy. What should you do?
I wish I could list nine easy steps. It's not that simple. First, it depends on the size of the debt -- $31 calls for a different strategy than $1200, or $34,000. It's different chasing an individual than chasing a company. If it's a company, it depends on the size of the company. It can also depend on how important you are to them.
Let's look at the main categories, then list things that often work. But caution: don't follow any of this slavishly. Use common sense and a bit of psychology. We're dealing with quirky, obstinate, vain and wonderful humanity -- even if they are debtors. You know the history of the debt, and you know what the debtor is like. Use everything you know. Use it skillfully to turn up the pressure.
Little Debts Owed By Individuals
1. Write them a letter, saying it's unlike them not to pay promptly, and please could you have the money. Use a bit of shame on them.
2. Keep phoning them, politely but firmly. (Keep threats out of it, but keep records of the calls you make -- they may be useful later.) Just wear down their excuses and hope they'll get tired of it all. By and by, it may seem simpler for them to pay the $31.
3. If a check is there (they say) but for some inventive reasons it never gets sent, say you'll send a courier around at 10.45 to pick it up. That often works wonders.
4. If it seems worth it, send someone from your office around to pick up the check. If you can afford to do this, you'll almost always get a check this way. (Professional debt collectors favor calling around on Saturday afternoon.)
WARNING: You'll probably be all right visiting the debtor personally, if you're just offering to pick up the check and you don't start making big waves. But if you handle things wrong, there's always some danger of being prosecuted for 'harassment'. A legally minded (or bloody-minded) debtor might try calling the police. True, the police might have better things to do than follow up. But don't ask me to guarantee it.
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