By Terry Ledlin, Natalie Ledlin and Holly Jackson
Avoiding bad debt and debtor heartbreak
OK, we’ll admit it…..Married at First Sight has been a staple diet in our office for the last couple of months (although it did seem like it would never end).
A common theme (outside of selfies, Insta followers, Botox and fake body parts (trout pouts and tattooed hairlines scored well here) was “THE FEELS”. This expression is meant to convey a “good feeling”, a sense that all is well with the world and life is full of promise.
That got us thinking about what happens when “the feels” you have with your customer start to go rogue and how to react to what might be the end of a beautiful relationship. Here are some examples of how “the feels” can flow from “simply the best” to “I can’t believe this is happening to me” in a surprisingly short time.
1. The Long Goodbye
We all know this one, it starts with a slightly overdue payment and slowly gets worse. You suspect there is something wrong, but you don’t want to raise it directly for fear of upsetting the relationship you have convinced yourself is solid and strong. “Surely if there was a major issue I should know about, they would tell me?”, you repeat to yourself whilst trying to ignore your intuition.
The one thing that does get repeated is the same late payment behaviour until you decide to seek assurances (secretly dreading the answer). “It’s all cool, don’t stress” you are told, knowing that in the entire history of civilisation, no-one ever stayed calm when they were told to.
OUR TIP – Deal with the issue before it deals with you. Don’t come from fear, this is your money, your asset, if there are any issues get them out in the open early and deal with them. You don’t deserve to be gaslighted. Long goodbyes only delay the inevitable heartache (as any MAFS viewer will attest).
2. Lack of Commitment (the Dreaded “C” Word)
You know this one too, the inability to give a straight answer or address the issue.
“When can we expect payment?” is rebutted with, “We should have some funds coming in soon”. Wrong answer. You have supported the customer by extending the privilege of credit, you have agreed to payment terms and delays are now affecting you and your business. You are not a bank (or even a therapist, according to MAFS). If the customer needs money then they should check out GoFundMe or hit up the family, stop giving YOU the runaround.
OUR TIP – Think about a “Commitment Ceremony” (you can’t say no to CC’s) where you press the customer for a fixed time for payment that is not dependent on anything else. For example, you can say “Will payment be made no later than Friday 20 August? I need you to commit to a date otherwise the matter will be escalated.” (Make sure the word “date” does not refer to a candlelit dinner, some customers will stop at nothing to avoid payment).
3. The Cold Shoulder
This is where the feels start to fray. The customer avoids your calls and emails or makes excuses like, “My ex-girlfriend’s mother just died and I have to go to the funeral in Ibiza New Zealand”, “I’m waiting to hear back from (insert name of some innocent party)” or even “I didn’t get your call/email/voicemail”. You know all this is just BS, your adrenaline is pumping and you’re about to engage in some wine throwing. You smell a (love) rat and you are in one of those “not happy Jan/Jack” moods.
OUR TIP – Time to get tough. This is no longer a matter of not being paid, but a matter of protecting the asset (no, not your heart, but your receivables which are looking very vulnerable right now). Look at any outstanding orders, put the account on hold and check to see if payments have been made in rounded amounts rather than specific payments for specific invoices. You may be in the friend preference zone, so be careful not to look like you knew or should have known the customer couldn’t pay its debts as and when they fell due.
Beware the cold shoulder approach, it really is the start of the emotional wreck still to come.
4. The Betrayal
The lies and deception are out in the open and your relationship with your customer is now well and truly broken.
“The Feels” are gone. You have been lied to, promises have been broken, the trust is gone, and you have now been made aware of the ultimate betrayal – there is the “other” supplier! (be still my beating heart).
Despite all your efforts, all your goodwill and all your championing of the customer’s cause, they have let you down. If you were on MAFS, this would be the part where you sit crying into the 18th drink you had that night with your “mates”. If you’re thinking, “Woe is me, was it my fault? Could I have done anything more? Why does this always happen to me?”, then don’t. IT’S OVER. Don’t beat yourself up otherwise you will lose perspective and your reputation will be as good as a ratings drop.
OUR TIP – Wise up! Start thinking about recovery action. Quickly bring in outside support like lawyers (or even relationship experts) to try and minimise any loss. Remember that if you have been duped by a con artist, chances are there will be others in the same (love) boat. Speak to others in the same industry (at a dinner party perhaps?) to see if they have been affected too, maybe you could even team up and teach the cad a lesson! Did someone once say “Hell hath no fury”? They obviously hadn’t reckoned on you.
5. Being Dumped
The letter from the Administrator or the Liquidator says it all. You’ve been dumped. The Experiment is over and there is very little you can do about it…or is there? You don’t have to just roll over and be downhearted, there are things you can do even after the dumper (your customer) has made known what they think of the dumpee (that’s you).
OUR TIP – As soon as you receive notice of the appointment, start preparing for what will happen next. Do you have PPSR registrations? Have you checked to make sure they are valid? Have your T’s and C’s properly allowed for the creation of the security interest? Where are your goods/stock stored? Can you repossess them? What steps should you take under your insurance policy (if you have one)? Is there a creditor’s meeting you need to attend? Are you in the preference zone? What are your rights as a jilted supplier? What can you do now to prevent this heartbreak from happening again?
The FEELS may have been there at the start but they have now frozen over and been replaced by the FROSTS as reality bites. Like MAFS, Ledlin Lawyers won’t keep you guessing, we will address all those questions and more in our next article where we will provide an action plan and checklist of what to do when love goes sour. The Experiment might have ended, and this particular battle lost, but the war is still there to be won.
More articles like this: It’s a matter of trust (if you know what to look for)
About the author
Terry Ledlin is Special Counsel of Ledlin Lawyers, a boutique CBD law firm with 50-years of experience specialising in Credit Management and Collections, Commercial Litigation, Insolvency and Commercial Documentation. Terry is a practical and experienced lawyer who has worked with government agencies, private and publicly listed national and multinational companies across many industries. His speciality is helping to solve complex commercial issues.