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Tips to Secure Payments on Time, Every Time

Relevant For:

Business owners and managers dealing with sales.

Key Points:

  • Establish comprehensive terms of trade to define responsibilities, secure payments, and limit liabilities.
  • Maintain ownership of goods until fully paid through retention of title clauses.
  • Register a security interest on the PPSR to reclaim unpaid goods and claim proceeds.
  • Prioritise your claim over earlier creditors by registering a Purchase Money Security Interest (PMSI).

Full Article:

In business, it’s a sad reality that sometimes those you deal with may let you down. This is especially true in times of economic uncertainty. To safeguard your interests, especially when dealing with new clients, it’s crucial to implement two key strategies: comprehensive terms of trade and registering a security interest over unpaid assets.

Implement Comprehensive Terms of Trade

Crafting comprehensive terms of trade is your first line of defence. This practice not only clarifies your obligations but also sets expectations for payment and liability. Here are the key benefits:

  • Clear Scope of Services: Define your responsibilities and avoid disputes.
  • Payment Assurance: Establish a direct recourse to business owners, avoiding company “shells”.
  • Retention of Title: Maintain ownership of your goods until fully paid.
  • Limited Liability: Exclude implied warranties and limit your liability to manageable amounts.
  • Payment Terms: Specify invoicing schedules, enforce payment rights, and charge interest on late payments.
  • Security Interest: Secure your goods until payment is complete, allowing you to reclaim them if necessary.

Once established, these terms can be consistently applied, providing ongoing protection.

Register a Security Interest

To further protect your interests, register a ‘security interest’ in unpaid goods on the Personal Properties Securities Register (PPSR). This registration offers several advantages:

  • Reclaim Unpaid Goods: Retrieve goods not yet sold or used.
  • Claim Proceeds: Assert your rights to proceeds from the sale of your goods.
  • Continued Security: Maintain your interest even if goods are mixed or processed.

Without this registration, you risk becoming just another creditor, receiving minimal repayment. Note that priority is given to secured creditors based on registration order. By registering a Purchase Money Security Interest (PMSI) before delivering goods, you ensure priority over earlier claims, such as a bank’s general charge.

In conclusion, while building strong relationships with customers and suppliers is vital, ensuring you’re protected if a deal goes awry is equally important.