As 2016 draws to a close you might spend a bit of time
reflecting on the year that was and what this means for your
Questions on your business growth and your bottom line might
come up. If your accountant was not already on your back about it,
questions on the amount of people and businesses that owe you money
might also be raised. With January being a month notoriously bad
for cash flow, such questions seem fitting as the collective value
of monies that remain owed from within the last year, leave you
unable to kick off the new year in full swing.
Whilst we can certainly help businesses recover debts, we also
think it is worth looking into why there are so many debts in the
first place. If you use materials or incur any fees in undertaking
work for someone, it is vital that you at least obtain that amount
upfront. There is nothing worse than not getting paid for a job and
then having to satisfy your suppliers out of your own pocket. You
should also consider if there is anything further you can request
upfront, or, can you make sure you have payment in full before you
(for example) install the hot water system, or, hand over the
client's tax return refund? Although it sounds crazy, think of
other businesses who generally have no client debts – when
you get your haircut, can you pay for it 14 days later? Can you pay
for your new car later on? Well sort of – if you arrange
finance! Which leads to the next point. If you are offering a
bigger ticket item, like an air conditioner, can you use a third
party to offer finance? That way you get paid upfront. You may even
attract a larger market share if your competitors don't offer
We often get feedback from clients that find their own customers
are unwilling to pay much upfront, in case there are problems with
the quality of work, or if they worry you will pocket the money and
flee to Bali in the middle of the night. To provide assurance to
them, why not have terms and conditions that set out how much of a
deposit you require and when the balance is due? You can also cover
when a customer can cancel their request and what type of warranty
you will give. It could even include interest on any late payments.
Increasingly we are finding terms and conditions that require a
director to personally guarantee their company's debts (and
lease) as well, which can give you further options if a company
owes you money and subsequently goes into liquidation. If there are
any disagreements between you and the customer, you now have a
starting place that should set out what you agreed to do and what
they agreed to do. Terms and conditions are a vital tool in
improving communication between yourself and your customer and can
also help get more payments in, quicker, so it is better for your
cash flow as well.
At Coutts Solicitors & Conveyancers we can draft your terms
and conditions and assist with debt recovery work too. Improve your
business cashflow with some help from Coutts.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The purchase price of an operating business is usually attributable to net tangible assets and intangible assets, such as customer relationships or a brand name. Intangible assets may comprise a sizable portion of the total assets acquired.
The Full Federal Court has allowed Lilyvale Hotel Pty Ltd to bring forward losses in reliance on the same business test where Lilyvale previously ran a hotel business using a manager.
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