Avoid business icebergs: Do your due diligence

This is a guest post by Colin Porter, Managing Director and founder of CreditorWatch. CreditorWatch is an established commercial credit reporting bureau and data intelligence company based in Australia. CreditorWatch provides small and medium sized enterprises with affordable credit reporting products and services that were previously priced out of their reach.

What you see on the surface is not always what you get, especially when it comes to other businesses. Here’s why doing your due diligence is an important step in a business relationship.

We all know the story with icebergs: only one-eighth of it appears above the water, making it hard to judge its true size and nature. The thing with icebergs is that from the outside you can’t see the cracks on the inside that could cause the whole thing to fall apart.

It’s the same with businesses. What may well look like a well run business on the outside could have serious internal problems that may jeopardise the viability of a business relationship. To find out what these cracks may be, you need to do your due diligence.

Just because a business is big and reputable, or has glossy brochures and a flashy website, doesn’t mean it is an ideal customer. It certainly doesn’t mean you should do business with them on reputation alone. You wouldn’t believe the size of the companies on Australia’s worst payers list. The thing is many of them get away with it because they bully other businesses, or they are only slow to pay certain creditors. You need to arm yourself with the knowledge and the tools to counter this behaviour.

Due diligence—boring but important
What do I mean when I say ‘due diligence’? Due diligence is the general term for all the checks that you do prior to entering into a business relationship or transaction with another party. This may include substantiating their company and legal status, looking at their credit history, and gathering testimonials from their current creditors.

Just like icebergs have glaciologists, businesses have debtor registers and credit reporting agencies such as CreditorWatch to collect data and analyse the results. This information will help you keep your eyes open when you make a decision on whether to take someone on as a debtor.

Businesses often get stung when they find out they have been chasing a debt from a company that doesn’t exist. A credit check will bring up the trading name and the company name of a business. This distinction is important when you are after money owed; you need to address your invoices to the company and all follow-up correspondence needs to be addressed to the company, not to the trading name.

Credit status will tell you how risky it is to extend credit to the business. Even if the business has a good credit status, it’s advisable to look at their credit history as well, to note any payment delays or defaults in the past. There may be good reasons for the occasional delay, so ask if you’re unsure of what the data indicates and note any patterns.

Maybe this debtor tends to forget about smaller invoices, smaller enterprises, or businesses in certain industries. Consider asking for a credit testimonial from a business similar to yours, and ask yourself whether you’re willing to accept that behaviour. Perhaps you can formulate credit terms that will counter it.

How solid is the future?
Once you’ve ascertained that the iceberg is solid, don’t assume that it will be solid forever! Recognise that a business relationship is a living thing—many businesses forget this and tend to ‘set and forget’. The business environment changes every day and you need to keep on top of how this will affect your debtors and therefore your business. Check for warning signs regularly, even if you just keep an eye on the news once a week for shifts in the business environment.

It’s also good practice to do a debtor check every month or so, just to ensure the health of your cash flow. You can do this in your own recordkeeping, just by invoicing promptly and setting reminders to chase debtors if you haven’t received payment by a certain time. With services like CreditorWatch,
you can create WatchLists that will alert you if another business files a ‘failure to pay’ report on any of your clients, suppliers or partners.

The important part is to act on these notifications. If the debtor knows you’re monitoring them, they are more likely to pay on time. This is especially true of larger companies that may otherwise get away with bullying smaller companies by withholding payment. Big companies have more to lose when their reputation is at stake.

Fighting bad debt
After all your due diligence, if you still want to do business with a risky debtor then one defence against becoming a bad debt victim is to set credit terms that favour you. Try to match your risk appetite with the payment method and be clear about why you are considering an alternative to the standard 30-day invoice.

The Holy Grail is to get your client or customer to pay upfront, but this is not always possible due to market forces. Other favourable credit terms you could consider include the debtor paying you a portion upfront and the rest at an agreed time, or the debtor paying you in regular installments. Limiting the amount of credit you lend is also advisable.

If this doesn’t work and you have a bad debtor on your hands, it’s best to get a third party involved to witness the situation. This third party can be anyone from an external accountant or business coach, to a mediator or legal body.

A service like CreditorWatch can act as a silent third party. Because the service is all about registering bad debtors for the benefit of the business community, your debtor actually puts their reputation at stake when they delay payment or don’t pay you at all. A bad debt register stands as a reminder to them that other businesses can search for, and find, these negative reports against their name. The result? Less creditors willing to do business with them until their behaviour improves.

If you want to use the ‘third party accountability’ method to control your debtor, make sure you communicate the presence of that third party. Tell them that you have an external accountant or business coach who oversees payments and advises you on running your business, or that you aren’t afraid to bring in a mediator or lawyer if things get out of hand. And certainly use the CreditorWatch logo on your invoices and statements to warn them that you can put them on a bad debt register if they don’t pay.

Managing bad debtors needn’t be a chore if you have a strategy in place. Understand what the debtor has to lose by delaying payment or defaulting and use that as the trigger to ensure that they stay in the good books. Don’t be the lost ship in a sea of icebergs—know where you sail!

Want to try out CreditorWatch for free? CreditWatch is offering Shoeboxed customers a 60 day free trial – double their usual offer!

Overthrowing the Paper Dictator: RightSignature and Shoeboxed Lead the Revolution

This is a guest post by RightSignature, a web service that provides the easiest, fastest way to get documents signed online.

The Terror of Paper

Business is competitive. While skill and tactics most certainly influence outcomes, there is a simpler – and more achievable – factor that determines success for many: productivity. Professionals’ time and resources are limited, and those who manage them most efficiently win.

And yet, for many businesses, there is an age-old tradition that is devouring valuable time, introducing errors, and killing productivity. That tradition is using paper as a means of communicating and archiving business details. Paper is the tired dictator of under-performing companies, stubbornly imposing the status quo and preventing progress (if you haven’t seen Sacha Baron Cohen in The Dictator, check it out).

The Paper Dictator perpetuates his reign through two common methods: ignorance and fear. Most professionals are unaware that electronic copies of documents are legally valid for most purposes, and they are often afraid to join the paperless revolution.

There’s good news, though: Increasingly popular online software applications are replacing paper processes with super-efficient digital workflows. Two of those services, RightSignature and Shoeboxed, are allies in this “war on paper,” each providing a simple, elegant web-based way to accomplish a task that has previously required handling paper.

The Receipt Battle

The Paper Regime: You receive paper receipts everywhere, all the time. Receipts are the established way to track purchases and prove expenses, and they become critical documents during tax season. Paper slips for every single purchase pile up very, very quickly. Paper receipts are easy to lose, difficult to sort into more meaningful data, and take up a lot of space on your desk or in your filing cabinet. The psychological effects that this clutter has on creativity, happiness, and productivity are significant.

The Shoeboxed Revolution: Shoeboxed converts all of your receipts into digital documents and archives them in your Shoeboxed account, accessible from anywhere. Users have the option of sending receipts to Shoeboxed by mail or scanning receipts themselves by scanner, photo, or mobile device to ensure that no receipt falls through the cracks. Digital receipts are easily searched, sorted, and categorized, and every one is IRS-acceptable. Best of all, those stacks of paper receipts are removed from your life completely, freeing up your desk and boosting your productivity.

The Signature Battle

The Paper Regime: A paper contract or form with a signature has always been the indelible symbol of a closed deal or a binding legal agreement. A signature guarantees the signer’s understanding, commitment, and identity – and that guarantee will be upheld in court, if need be. In an age when more and more business is done online, with contacts out of town or even overseas, two parties sitting down at the same table to sign the same piece of paper is clearly antiquated. Sending a paper document to a signer and waiting for them to sign and return it can take days or weeks – eternity in an era where we are accustomed to communicating instantly. And in situations where many parties need to fill out and sign the same document, these problems are multiplied.

The RightSignature Revolution: Just like Shoeboxed turns clumsy paper receipts into electronic format, RightSignature turns slow, painful paper document signing into a fast, easy, efficient process. Users can upload any document, or even turn their frequently used documents into Reusable Templates. With just a click, documents are sent to one or many parties for electronic signature online. Recipients fill out and sign RightSignature documents on any computer or even a mobile device. And legislation around the world establishes e-signatures as legally equivalent to pen-and-paper signatures, eliminating the need for paper contracts once and for all.

Winning the Battles, Winning the War

While most of us are fervent users of email and the web, there are a handful of business tasks where paper is still the default conduit. Join the revolution by rooting out each of the remaining paper processes in your life, and you’ll improve your productivity – and ultimately your success.

Are You Chewed-on Fruit or a Talking Lizard? Tips on Branding Your Business

This is a guest post by MOO.COM, a service that lets businesses create and customize premium Business Cards, MiniCards and Postcards.

Brand loyalty for any business, new or established, it’s something to aspire to – it’s a hugely powerful way to keep customers coming back. So how do you create a strong brand that stands out in today’s crowded marketplace? Well, there are several ways to do it – here are a few of our favorites!

Set your tone – Is your brand chatty, or formal? Witty or down-to-earth? Choose carefully, because tone speaks volumes about your company and whom you’ll appeal to. It’s also important to keep it consistent across your entire editorial, to create a recognizable brand voice.

Choose a strong design. Think of your favorite brands – they usually have memorable colors (up to two usually works best), a strong and simple logo and perhaps a particularly unique font that you always associate with them. So find a designer who can help translate your business into a strong visual brand.

Perfect your packaging. All your marketing materials should represent your brand – your business cards, packaging, and promotional giveaways should remind customers who you are and what you do. So, now that you have your stand-out logo and brand colors, make sure you use them on everything you send out.

Smart marketing – If you don’t have unlimited funding, you’ll have to spread the power of your brand by other means, such as a weekly e-newsletter, social media and word of mouth, free samples and of course, a unique and unusual branded Business Card!

Want to try out MOO.COM Business Cards for free? MOO is offering Shoeboxed customers 50 cards, just paying shipping.