Hi guys! They say knowledge is power and I couldn’t agree more! When it comes to invoicing, accounts and everything to do with debts though, there are many grey areas and it’s no wonder the average small business owner feels a bit lost when it comes to what is and isn’t true. Given cashflow is the number one reason why businesses fail, I thought I would clear up some misconceptions for you all and I hope this empowers everyone. I give to you all my top 5 FAQ’s and if they are true or false:
1. When you sue someone for a debt, they have to go to court- MYTH.
Suing someone means serving them with a court document which then gives them 21 or 28 days to either defend the action or pay. They don’t have to physically attend a court unless they want to defend the matter.
2. You can take as long as you want to pursue a debt- MYTH. You only get 6 years, after which time the debt is classed as Statute Barred. This means the customer no longer has to pay. The good news however is that any payment they make resets the Statute Barred date for another 6 years.
3. A verbal contract is just as legally binding as a written one- FACT. Yes folks, your customer telling you on the phone to proceed with the work is just as binding as them emailing you the same request. Having said that though, I would always recommend you get confirmation in writing too.
4. Black marks on your credit file go away once you pay them- MYTH. Credit defaults remain on your credit file for between 5 and 7 years, regardless if you pay them or not. The only way they can be removed is if they were listed in error.
5. It is the supplier’s responsibility to verify the entity liable for payment BEFORE the debt is incurred- FACT. Just ask- “Who should I make the invoice out to?”.
6. My customer owes heaps of people money and I’ve heard they’re going under, so I may as well write off my debt- MYTH. Never ever believe innuendo. I have collected over $14 million dollars of other people’s money, and almost every time was told before hand that the customer had no money and it was unlikely I’d get it.