If your customer is a small company, obtain a guarantee from the directors. It is often more effective to pursue a director personally, rather than a company.
Have written terms of trade that the customer signs before you supply the product or service. This makes it very difficult for the customer to dispute your terms at a later stage, which often happens if the terms are posted with an invoice, after supply, or not recorded in writing at all. Include terms that:
- state when payment is due
- set a default interest rate for late payment, and
- provide for recovery of full legal costs, should you have to take enforcement action.
If appropriate, include specific reference to creating a security interest pursuant to the Personal Property Securities Act 1999. This will enable you to become a secured creditor. If you do this, you will also need to be aware of the process for registering a financing statement on the Personal Property Securities Register at www.ppsr.govt.nz/cms, without which your security won't be complete and is likely to be ineffective.
Take steps as soon as a customer is late. Speak with them if possible. If not, write to them. Too often debtors are not contacted early enough and a problem that could have been a minor one becomes a major one.
The overall key is to take care with your procedures and documentation at the outset of the transactions. It may require time and money to put everything in place but it will more than pay for itself over time.
Lawyers often deal with creditors who fail to recover some or all of their debt, despite having provided an excellent product or service, because they haven't taken enough care or obtained adequate advice when setting up their paperwork and procedures
For more information contact Paul McKendrick at .(JavaScript must be enabled to view this email address)
The contents of this newsletter are of a general nature only. While the information is believed to be correct no responsibility is accepted for its accuracy. Readers are advised to establish the applicability of information in relation to specific circumstances and not to rely solely on the text of this newsletter.
