Business & Commercial Law - How To Improve Your Cash Flow and Statutory Demand

“Neither a lender or a borrower be, for  loan oft loses both itself and friend and borrowing dulls the edge of husbandry”. William Shakespeare.

Credit

Credit is an integral part of commerce, sometimes for the better and at other times for the worse. To improve your cash flow and to ensure that credit is being given to debtors who are credit worthy, a comprehensive credit application should be completed at the inception.  From the information in the credit application referred to below you are likely to be in a better position to recover any debts.

Credit Application

The Credit Application is often the most important document, which assists in the cash flow of a business.

The Application Form should include the following:

1. The debtor’s name, company name, ABN, trading address and registered address, telephone, e-mail address.  Ensure that you are not given a PO Box address.
2. The names of all the directors or partners and their private addresses and phone numbers including mobile.
3. Details relating to their current financial position. Example, last financial year’s profit and loss account and balance sheet and banking details. Further, consent to access Profit and Loss Account and Financial Information from the Company’s accountant.
4. The number of years the applicant has been in business.
5. Details of the lease, if leased, or ownership of the premises used for the business.
6. References - preferably two.
7. Whether the directors are prepared to sign personal guarantees.
8. The date of the application and acceptance of your Terms and Conditions of Sale. Ensure that the application is signed in your presence by a Director of the company.

Terms and Conditions of Sale

The Terms and Conditions should include:

1. Terms of trading.
2. Details of any discounts for payment within.
3. Details for placing of orders.
4. Details of delivery.
5. Details of progressive delivery and progress payments.
6. Inspection and acceptance.
7. Title and risk and right of entry.
8. Returned goods.
9. Loss or damage to goods in transit.
10. “Act of God” events or Force Majeure.
11. Remedies for late payment or non-payment of accounts.
12. Warranties.
13. Credit assessment.
14. Stop credit policy.

Personal Guarantee and Indemnity

It is important that you obtain personal guarantees from the directors of a company.  The directors usually do not wish to sign personal guarantees and you may suggest that the personal guarantee is being requested to ascertain the confidence of the directors in the company to pay its debts.  If the directors are confident then you have a substantially lessor risk in providing credit.

All terms and conditions should be a lawyer including and indemnity clauses. A personal guarantee may result with your business being paid first before any other creditor, in the event the company is placed in the hands of a liquidator.

Statutory Demand under the Corporations Act

A Solicitor from our office will be happy to discuss with your credit manager the various steps including issuing of Statutory Demands under the Corporations Act to ensure that you collect from your debtors the payment due to you without delay.