Frequently asked questions (FAQ)

Here are some commonly asked questions regarding credit management and debt collections:

What is Claw Back

A contentious part of insolvency is the ability of a liquidator to “claw back” money from individuals or companies who were paid up to 2 years’ prior to their appointment. Known as a ‘voidable transaction’, the payment can only be recovered if the company in liquidation was insolvent at the time someone was paid. Under the relevant section, a court must not order repayment by someone who proves that when they received a payment from the insolvent company, they acted in good faith, had no grounds to suspect insolvency .Voidable transactions are intended to ensure all creditors of insolvent companies are treated equally, they are intended to recover payments that have been made that are essentially out of the ordinary.

Should I consider factoring?

If you are selling plenty of products and services but your money stays with the customers who don’t pay their bills on time then implementing a robust credit management process would eliminate cutting into your margins and losing your profit which is effectively what would happen if you factor.

How do I know if a potential credit customer is going to be a good payer?

Before your business spends money turning prospects into customers, you need to find out if they have the ability to pay. Potential credit customer’s payment records are essential to help eliminate known defaulters.

Do I need terms and conditions for my business?

Ensuring terms and conditions are up to date, clear and precise is necessary to cover yourself and your customers if something goes wrong. Also Interest, legal costs or collection fees cannot be charged if a customer defaults and you have to pursue them for the money.

Whats the difference between an estimate and a quote?

Estimates give the customer a rough idea how much they will have to pay. Suppliers should use their skill and experience when estimating the cost to ensure it is reasonably close to the final cost. If an estimate is going to be exceeded by 20% the supplier needs to inform the customer before continuing.

A quote is an agreement to do a job for an exact price and if a quote is accepted the supplier can’t charge more than the agreed price.

To ensure a quote is legally binding the supplier needs to produce the quote in writing and if possible as part of written terms and conditions.

The customer needs to sign a copy of the quote (or the terms of trade if they have used them) before receiving the goods or services.

 

Obtaining the right advice to suit your business is imperative to improving cash flow.