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Interview with Credit Consultant Laurie Brenssell

Credit Management Control – How to Use Preventive Measures to Keep Money in the Bank

Four Easy to Implement Preventions to Guard Against Credit Loss

“A sale is not a sale until it is paid for.”

A veteran of the credit management industry, Laurie Brenssell has more than 40 years of experience and expertise in credit management. Having worked in debt collections and credit management education throughout his career, he says: “I am absolutely and utterly passionate about the debt collection industry and I absolutely adore working with the people that have the job of working with a debt collector, credit manager, credit controller. They are often much maligned people in businesses, sadly, but they are amazing with customer relationships and are an essential part of any business, from a large corporation to a small and medium enterprise (SME).”

Brenssell pioneered the use of industry closed user groups in New Zealand and currently four of these user groups within the construction and building industry in Auckland, Waikato, Canterbury, and Bay of Plenty New Zealand. These are effective networking groups organized to provide additional information on overdue debtors.

Companies can avoid high levels of overdue invoices, he says, by maintaining good working relationships with their customers and with a series of simple prevention processes that guide how your company manages credit collection.

Relationships are key to keeping your customers happy and paying their invoices. “If you’re firm, fair, and show empathy, then people will work with you. That’s the single biggest thing.”

However, as Brenssell points out, sometimes your customers hit a snag and fail to pay their invoices. “Nobody likes owing money. Very few people go out of their way to defraud or avoid paying money.”

Construction companies in New Zealand have largely managed to collect on invoices during Covid and have very low levels of overdue customers. However, three economic indicators have convinced Brenssell that collections may be about to become more difficult.

  1. Inflation is on the rise

Prices for imported materials have increased. “These increases are happening after the products have already been purchased, ordered, on the ship.” That means that there’s often an increase compared to the price originally quoted to the customer, which can cause friction if there isn’t sufficient communication. 

  1. Supply chain troubles have hurt New Zealand builders hard

Alongside higher costs, there have been significant delivery delays of goods from import partners like China to New Zealand. Builders are severely impacted when they are not able to access important materials like tiles, marble bench tops, wood products, or even kitchen items such as doorknobs. 

  1. Labour shortages appear to be here to stay

Seasonal workers who left New Zealand at the beginning of the pandemic to return to their home countries have not returned, which means that the labour market is tighter than ever. 

These factors, he says, combined with the rapidly increasing cost of housing in New Zealand, may mean that businesses will be squeezed for cash in 2022. 

Now is the time to ensure your company has preventive measures in place. These processes should be reviewed and understood by your entire staff. 

In summary, the key elements that can create a perfect storm in the construction industry are as follows: 

  • Lack of skilled staff,
  • Supply chain shortages,
  • Price increases,
  • Higher bank interest rates,
  • Rising inflation. 

Suppliers have begun to tighten credit issuances to SMEs at the same time they struggle to supply their key clients with products, and that means that SMEs have begun to search for new credit suppliers. Additionally, a significant number of inexperienced or undercapitalised companies who have tried to ride the construction boom now struggle, and there will be an inevitable rise in liquidations.

The key element in any ledger management is Prevention – if you are owed money, act earlier, be proactive, not reactive when it is too late – you risk losing your money and more importantly you risk losing your customer!!

Terms of Trade

Every company, no matter what size, should have a Terms of Trade document, which included New Zealand legislation called the Personal Properties Securities Act, and allows companies to register their interest in their clients and to become secured creditors in that business in the case of a liquidation of your customer.

“Terms of trade should be current, robust, and include the latest legislative changes.” Currently, Brenssell suggests to his clients that they should add language to their Terms of Trade that declares now and going forward there’s every likelihood that when goods land, they may have incurred additional cost.

Instead of supplying your customer with a quote, Brenssell says that companies should change the term to estimate, which is less firm than a quote, and can provide a measure of flexibility when goods arrive that have incurred an unexpected increase in cost.

More than that, it’s important to draft your Terms of Trade with a lawyer. Companies should not try to save money by copying a Terms of Trade from the internet, or worse, from an industry with completely different billing rules, like the time a plumbing company copied its agreement from a funeral home.

Credit Policy Procedure

A set of guidelines for everyone in the business, from the owner or CEO to the front office staff, to set out how they are to meet and interact with new customers. This policy should also clearly document what happens if something goes wrong and there are disputes, or complaints. It’s crucial to implement a policy with detailed processes for managing overdues.

Every company should perform credit checks on their potential customers, either as a trade reference phone call or through an established credit reporting company.

Conclusion

The keys to keep debt from costing your company money are straightforward, says Brenssell. Concentrate on good communication and building relationships. “People don’t pay if they don’t like you.” In addition, it’s important to implement processes and guidelines in your company so that you’re prepared and can lessen the impacts of debt, so your debt doesn’t get unmanageable.”

Brenssell is also a strong advocate of using software to help your company track and handle credit collection. A company like Nimbus can advise you how to use your customer relationship management tools, alongside job costing, job management, and debtor’s functionality to be certain you’re invoicing the right costs in a timely manner and so that your invoices and payments are tracked. You can schedule a call with your Nimbus consultant to learn how to set up and manage your credit collection before it becomes an issue. 

For more information about credit control visit Laurie’s website https://www.lauriebrenssell.com/

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