Articles

Guarantees - why do Courts seem to hate them so much?
Category: Credit Management Practice
Author: Peter Hattaway
There's a 1997 English case called Credit Lyonnais Bank Nederland v Burch [1997]1 All ER 144 which is, in its way, an heartening example of staff loyalty.  In this case a junior employee gave a mortgage over her flat and an unlimited per...

Credit management and punishment
Category: Credit Management Practice
Author: Sarah Fifield
"Jason! You do that one more time and that's it - we'll go straight home. I'm not telling you again. Don't touch it...Jason, I'm telling you...NO...I'm not going to tell you again...don't touch it...Jason...don't you dare do that again..." Thi...

The ghost of Christmas past due
Category: Credit Management Practice
Author: Peter Hattaway
Christmas and the holiday season are always a difficult time for credit staff. We know credit managers who bemoan the fact that their days sales outstanding (DSO), one of the standard measures of credit management performance, jumps 10 days in J...

An innovative way to make money from credit
Category: Credit Management Practice
Author: Peter Hattaway
Chris Bishop, Telstra's General Manager for Credit, told us at a conference in Sydney last May that on 5 May his company had introduced a $5 late payment fee on its Australian accounts. That is: if you're late with your payment, they add $5 to y...

Getting people to keep their promises to pay
Category: Credit Management Practice
Author: Sarah Fifield
"I don't really know - I just always have..." Many of us have said this type of thing when we've been asked why we do business with a particular firm, why we always prefer a Japanese car (or a Holden, or a wagon), and why we keep going back to t...

Banking Tips for Creditors
Category: Credit Management Practice
Author: Peter Hattaway
I intended to write this column about a banking service called bills for collection and how it could be used to clear rubber cheques. I rang the 0800 customer service lines of BNZ and Westpac where I spoke to youthful-sounding staff who had never...

Setting Credit Limits - No Easy Answer
Category: Credit Management Practice
Author: Peter Hattaway
The financial controller of a computer hardware company a tough, competitive business with low margins and customers (computer retailers) that have been dropping like flies in the last year or so - asked me the other day how to set credit limits....

Credit Management for Councils
Category: Credit Management Practice
Author: Peter Hattaway
Credit staff who are looking for a challenge should definitely consider working for a local council. Councils have a broader range of credit problems than virtually any other creditor. Their debts include (to mention but a few) lost library books...

Some Tips on Collecting Money from Farmers
Category: Credit Management Practice
Author: Peter Hattaway
I know a debt collector who is fanatical about his horses. One day, some years ago, he saw the horse of a debtor in the Methven Cup. He had already entered judgment against this debtor on behalf of a client. He now knew that the debtor had some m...

The Psychology of Making Clients Want to Pay
Category: Credit Management Practice
Author: Peter Hattaway
"Help me out here, mate. That rottweiler back at the office is giving me grief about my customers' overdue accounts. Do me a favour and write me a cheque would you?" This version of good cop-bad cop is, more or less, the standard salesperson's ap...

Are Prompt-Payers Costing You?
Category: Credit Management Practice
Author: Peter Hattaway
An exercise in one of our seminars puts credit staff in the position of debtors, and forces them to make decisions about which creditors they will pay and which they will not pay. One of these scenarios is for a debtor whose debts are due tomorro...

Exploding some of the Myths of Business Failure
Category: Credit Management Practice
Author: Peter Hattaway
One of the frustrating things about working in trade credit management in New Zealand is that there is very little good statistics-based research available to answer the question - what are the signs that a business is going to fail? Probabl...

The Charming Credit Manager
Category: Credit Management Practice
Author: Peter Hattaway
[A]n abrasive, petty, obsessive person can find fulfilment as a credit manager. Since the job requires persistence and a readiness to be nasty if need be, it acceptably channels otherwise troublesome id tensions, and produces peer-respect as a v...

Bad Credit Decisions and how to make them
Category: Credit Management Practice
Author: Peter Hattaway
A man we know went to test drive a luxury four-wheel-drive vehicle. He was wearing a pair of shorts and a singlet. The car salesman sized him up as someone who couldn’t possibly afford such a car and ignored him. After a while the customer walked...

Thirteen tips for credit management assertiveness
Category: Credit Management Practice
Author: Peter Hattaway
When we’re talking about training needs with a credit manager or training manager the word "assertiveness" often comes up, as in: "Susie needs some assertiveness training." But exactly what do they mean by the term. We’re going to look at what ma...

Coping with the stress of abusive customers
Category: Credit Management Practice
Author: Peter Hattaway
We know of some credit management operations that keep a book (some use a whiteboard) in which they write down some of the funny or "interesting" things customers say. In one business there is a regular competition to see who has been called the ...

Nine credit management rules for small businesses and entrepreneurs
Category: Credit Management Practice
Author: Peter Hattaway
Businesses generally fail because they run out of cash, and one reason for running out of cash is that customers are not paying you when they should. Credit management is part of cashflow management. Cashflow is something that I am much more awar...

Grow for broke - avoiding the trap of growing too fast
Category: Credit Management Practice
Author: Susan Hansen
Here's a cautionary tale of a business that was going well. It traded out of a single, profitable retail store. "But if we're making this much money with one shop," the directors thought, "we'd do even better with more shops." So they expan...

Nine ways to change the consumer payment hierarchy
Category: Credit Management Practice
Author: Peter Hattaway & Sarah Fifield
A credit controller who came to one of our seminars early this year told us about a problem she had. She had sold a car to a friend. She had received a cheque for half and the rest was to be paid the next week. Months later, the money hadn’t arri...

Helping people to keep to their payment arrangements
Category: Credit Management Practice
Author: Peter Hattaway
Bill, the editor of the Mercantile Gazette, has just reminded me that my article is overdue, so it's appropriate that I write something on getting people to do what they've promised to do. This is really important for creditors. When you call som...

How to avoid getting beaten up when dealing with debtors (or other conflict situations)
Category: Credit Management Practice
Author: Elke Meyer
Several years ago I was managing a security company specializing in club security. One night I noticed a man who had had far too much to drink, (not an unusual sight in a nightclub). I called one of my guards over and told him to strike up a conv...

What makes a good credit person?
Category: Credit Management Practice
Author: Peter Hattaway
I see lots of credit staff, either in our seminars or in their offices in the course of consulting or training projects. I hear the results of people’s work in terms of war stories they tell, or the figures that they achieve. In some cases I get ...

The five keys to successful reminder letters
Category: Credit Management Practice
Author: Peter Hattaway & Christine Toner
"This is the sort of English, up with which I will not put." Winston Churchill, a master communicator, poking fun at a written report Imagine a car finance company which, among its customers, has at least two obvious types. One type is...

9 lessons on asking hard questions of overdue customers
Category: Credit Management Practice
Author: Peter Hattaway
Some credit staff are very resistant to the idea of asking customers for "private" financial information. In a recent seminar we were talking about asking customers about their financial situation in the course of collecting debts - asking for fi...

Challenging times ahead for finance companies
Category: Credit Management Practice
Author: Peter Hattaway
I remember someone telling me a few years ago that in every issue of MG Business, there were at least a couple of dozen new company registrations with the word "finance" or "loans" in the company name. New finance businesses have sprung up like m...

Credit staff need stop credit option
Category: Credit Management Practice
Author: Peter Hattaway
I know a credit manager who got a job at a private school in Australia. The school had a frighteningly high level of unpaid school fees. It wasn't hard to identify the cause of the problem. The school had a stated policy that "no child will ever ...

What debtors say about how to collect money off them
Category: Credit Management Practice
Author: Peter Hattaway
One of the overriding themes of the work we do with collection staff is the need to understand the people - the debtors and the staff of debtor companies - that you're working with. A few years ago we did some interviews with debtors in New Zeala...

When your customers use you as a bank
Category: Credit Management Practice
Author: Peter Hattaway
Something which comes up regularly in our seminars is the issue of big customers blatantly and unashamedly overriding a creditor's payment terms. What can you do? The contract says that payment is due on a particular day, but the customer says, i...

Hug your credit manager
Category: Credit Management Practice
Author: Peter Hattaway
Credit management, as I'm often told, is not rocket science. A problem in some of the credit management seminars I teach is people who feel that they know everything there is to know about collecting money. "I've been in the job for five years/10...

A credit manager's worst nightmare - the death of Folole Muliaga
Category: Credit Management Practice
Author: Peter Hattaway
My heart goes out to the family of the late Folole Muliaga, and also to the people at Mercury Energy and its contractors, who I know will have wept many tears for Mrs Muliaga, and who, right or wrong, are being blamed for her death. The death has...

Avoiding clawback of insolvent payments
Category: Credit Management Practice
Author: Peter Hattaway
How to avoid clawback of payments Imagine a company owes you $10,000, and owes $10,000 each to four other unsecured creditors. In all cases, the money is well overdue. However, because you are an effective credit manager, you put some pres...

How to say what customers don't want to hear
Category: Credit Management Practice
Author: Peter Hattaway
I was looking through some borrowers' files with a lender client yesterday. A common theme in a number of cases we looked at was the inability of the debtors concerned to face reality. They consolidated credit card debt into a new loan, then we...

The Olympics of credit management
Category: Credit Management Practice
Author: Peter Hattaway
In normal times, by my rule of thumb, the average trade creditor gets about one bad debt for every 200 customers on credit terms for an average write-off of about 0.5% of credit revenue. Some have many fewer than that; some have more but allow f...

Beware of Doubtful Debt Collectors
Category: Debt Collection
Author: Peter Hattaway
Accountants, being used to the concept of audited trust accounts, may be surprised to learn that debt collection agencies don’t actually use them. Many of them have an account which they call a trust account and label as such on the cheque book b...

Thar's Gold in Them Thar Bills
Category: Debt Collection
Author: Peter Hattaway
In the late 80s in the United States, "Savings and Loans" roughly analogous to building societies, hit something of a bad patch. They went under in droves. In the aftermath, the survivors and the liquidators of those that didn’t survive looked fo...

Protecting Debtors
Category: Debt Collection
Author: Peter Hattaway
The other day I was talking to a gentleman who used to work as a repo agent. He’s a very softly-spoken, charming person, and when I say in seminars that the most effective credit managers and collectors I’ve known were those with the best people ...

How to make debtors feel guilty (and how it can backfire)
Category: Debt Collection
Author: Peter Hattaway
Why do most of us pay our bills? Because we know it’s the right thing to do. If we didn’t do it we’d feel guilty. What about those who don’t pay their bills? Don’t they know this? The chances are that they do know. What may surprise you thou...

9 rules for credit negotiation
Category: Debt Collection
Author: Peter Hattaway
Frankly, most credit negotiations are a brief, unprepared haggle. The phone rings and you’re haggling about whether the customer should pay over three weeks or six weeks. In two minutes it’s over and you’re talking to the next customer. You can’t...

Collecting hard debts in Asia
Category: Debt Collection
Author: Peter Hattaway
Here's a problem faced by a credit controller from a recent seminar. 'Steve' has come into a credit management job for a company with a lot of old debts to collect. Many are up to 4 years old. The amounts involved vary, but they are generally ...

Empathising with your debtors
Category: Debt Collection
Author: Peter Hattaway
Have you ever been in casual conversation with someone and suddenly they pour their heart out to you. "How's your week been?" I asked recently of someone I'd just met. I got a blow-by-blow reconstruction of a major life crisis that had commence...

The art of applying pressure to debtors
Category: Debt Collection
Author: Peter Hattaway
A project I did for one creditor started with an investigation of the current collection process. This was a series of letters (perhaps too many, but that's not the point of my story) and phone calls and legal notices with a certain number of da...

Collecting from the hopeless
Category: Debt Collection
Author: Peter Hattaway
Last year I found myself in the unusual position of trying to fix the problems of an Indian call centre. A client had had a large credit management call centre in Sydney. Someone had decided that they would save a lot of money by closing it dow...

Some Personal Property Securities Act Issues
Category: Legal
Author: Godfrey Livingstone & Peter Hattaway
The Personal Property Securities Act 1999 (PPSA) is one of the most significant pieces of commercial legislation ever enacted in New Zealand. When it comes into force (probably later this year) the Act will alter the existing law on securities. ...

Maori land is no bloody good unless it's working for us
Category: Legal
Author: Jim Gray
Maori land is no bloody good unless it’s working for us. We never fought over useless land. We fought over the warm land that lay to the north because it grew the biggest kumera. We fought over the forests where there was abundant bird-life. ...

Accountants in the Disputes Tribunal
Category: Legal
Author: Robert Finlay
In my role as a Disputes Tribunal Referee, I get cases before me involving accountants in public practice reasonably regularly say about once a month. Often they involve disgruntled clients who do not believe they have had fair value for money. ...

Australian Voluntary Administrations
Category: Legal
Author: Peter Hattaway
I attended the national conference of the Australian Institute of Credit Management in Hobart last month. Credit management in Australia is very similar to that in New Zealand. Their Bankruptcy Act is fairly similar to our Insolvency Act. The act...

Damage Claims
Category: Legal
Author: Peter Hattaway
About ten years ago, a woman I knew who worked at a debt collection agency was involved in a car accident. She and her boyfriend were innocently driving their ancient Fiat along the road when a poodle ran out in front of the car. In swerving to a...

Reckless Directors
Category: Legal
Author: Peter Hattaway
When, in the course of talking to groups of credit staff, I raise the subject of insolvent trading by directors, I usually ask who remembers the problems of Aoteoroa Television Ltd. The first time it came to my attention was when the government g...

Penalty Interest
Category: Legal
Author: Peter Hattaway
When someone wrongs you, one of the little voices inside your head may say, "how can I get them back?" If you own a small business and the wrong is that one of your customers isn’t paying you (and you’ve ruled out acts of physical violence) the a...

Scheme of Arrangement Rip-offs
Category: Legal
Author: Peter Hattaway
We know a gentleman who did a law degree many years ago (with one of the authors of this article). A successful businessman before he arrived at university, he made it quite clear why he was there: he wanted to know how to beat the system. In the...

Australian Credit Management Trends
Category: Legal
Author: Peter Hattaway
When looking at future trends in credit management one only needs to look across the ditch to Australia. Here’s what’s happening in credit management in Australia. One area where we are likely to see some future legislative initiative is cons...

Human Rights - v - Creditor's Rights
Category: Legal
Author: Peter Hattaway
In days gone by, there was no right to credit. Creditors didn't have to grant credit to anyone they didn't want to. In this age of political correctness, the Human Rights Act 1993 has changed that to some extent, at least in respect to individual...

Let's make it harder to avoid paying debts
Category: Legal
Author: Peter Hattaway
It's not exaggerating to say that the rule of law is at the heart of western civilisation. A big part of this is the fact that people know that they are bound by their contractual obligations. If everyone knew they could walk away from their cont...

Controversy over the Insolvency Law Reform Bill
Category: Legal
Author: Peter Hattaway
Like any sensible person, I try to avoid reading 300 page reports by Parliamentary Select Committees. However, recently I had to read the Commerce Select Committee's report on the Insolvency Law Reform Bill. I started it thinking that this was ma...

PPSA - why the Aussies will eventually copy us
Category: Legal
Author: Peter Hattaway
I had the interesting experience the other day of trying to explain the New Zealand Personal Properties Security Act to a meeting of senior Australian credit managers at an organisation called the Australian Credit Forum. I was given 15 minutes p...

How to Centralise your Credit Department
Category: Managing Credit Management
Author: Peter Hattaway
How does your credit manager feel about relocating say to Nelson or Tauranga? Credit management teams in larger corporations in New Zealand and elsewhere around the world have undergone some dramatic changes in the 90s which fit under the overall...

Ethics for Credit Managers
Category: Managing Credit Management
Author: Peter Hattaway
While I was researching a book on credit management in 1994 I spoke to a credit manager in Melbourne, a very competent operator. He told me, among other war stories, about the time that he discovered that the managing director of a business which...

Credit Management for Small Businesses
Category: Managing Credit Management
Author: Peter Hattaway
I got a phone call from an accountant the other day who has recently set up a small business with a number of other businessmen. The accountant has ended up with more of a hands-on role than his fellow-shareholders, and one of his responsibilitie...

A Credit Management Guide for New Zealand Exporters
Category: Risk Management
Author: Peter Hattaway
Credit management is about managing the risk of customers not paying. A general rule is that distance increases risk. This means that, other things being equal, exporting is a higher risk game than selling domestically. Take the case of a sh...

Factoring as a Credit Management Solution
Category: Risk Management
Author: Peter Hattaway
Factoring is a financing tool which is not highly regarded in New Zealand. It’s perceived by some as a desperate effort to get some cash, no matter what the interest rate, from a lender of last resort. The people at Scottish Pacific Business Fina...