Date: 24th July 2014
While the Christchurch construction industry may be busy, cash-flow is scarce and debt management is a nightmare according to Steve Conti of EC Credit Control, Christchurch. We talked to Steve about the current state of business in Christchurch and he warned that businesses that don’t have adequate debt management systems in place run the risk of not staying solvent.
Steve believes the cornerstone of running a successful business is using correct terms of trade and managing cash-flow through debt management.
Terms of trade documentation establishes a clear legal relationship with your customers right from the beginning. Documentation may include terms and conditions, credit application forms, sales order forms and personal guarantees. Having correct documentation in place will:
• Mean you have protection against the loss of profit
• Provide indemnity from potential liabilities
• Enable charges to be imposed for late payment
• Provide the advantage of reservation of title until goods are paid for (available in most circumstances where goods are sold)
• Improve cash flow and reduce the cost of monitoring payments
• Ease the resolution of disputes and unpaid accounts.
Another important aspect of debt management is having an understanding of the Personal Properties Securities Register. If your business gives credit (eg, you provide goods to another business and allow them to pay on the 20th of the following month) the Personal Property Securities Register (PPSR) affects you. You have a “security interest” in personal property.
Registering your interest on the PPSR gives it priority if the debtor later uses the same property as security for a loan from another creditor. Your registered interest has priority over other interests that are registered after your own registration date, and also over any unregistered interests, whenever they were created. If you have priority over another creditor’s interest, that means they will have to wait in line behind you to recover their money from any sale of the property.
There are plenty of businesses having a rough time in Christchurch but it’s not all bad news. Steve cites an example of a debt-laden Christchurch building company who were on the verge of going into liquidation and sought help from EC Credit Control. With professional assistance they introduced debt recovery procedures and debt management systems and were able to turn their position around and trade out of the crisis situation. They are still trading successfully today.
More important legal information for businesses: