05.12.09

Customer Relationships – what are “terms of trade?”

Posted in Business Tips, Customer relationships, Direct Debit at 2:41 pm by matt

There are a multitude of small business transactions carried out daily without a piece of paper being signed. These are small exchanges where the goods or services are provided and payment is made at the same time. In most cases, these transactions pass without event. There may be instances where the product has a fault or the consumer believes the product does not meet its advertised standard. The Trade Practices Act provides the legislative tool to manage these instances when they arise.

At PeopleHub, most of our clientele are either providing a service at a discounted price in return for the consumer guaranteeing their custom for an extended period of time (for example a gym membership) or alternatively they have provided a physical product and are collecting payment for this product over time (for instance a coffee machine).  These long term customer relationships, while also covered by the Trade Practices Act, generally involve some form of contract or terms of trade.

What are terms of trade you might ask?  It is simply a contract between you and your customer which sets out the rules for the purchase of the goods or services.  It spells out the obligations of each party in the transaction and makes it clear what the implications are if these obligations are not met.  We regularly come across businesses who do not have this fundamental document when trading.  The most common reasons are:

  1. “I don’t want to pay a lawyer to develop my contracts”
  2. “I don’t need them because I am on friendly terms with my customer”
  3. “It is too much paperwork for me and my customers”

While some people feel unconfortable getting contracts signed, they are essential should the relationship between two parties deteriorate.  This may be due to a customer paying late or the standards of the product or service dropping.  In either instance, a contract can provide the basis for moving the relationship back onto a positive footing.

An example of this is, many small businesses expect to be paid within 30 days.  When you notice a client beginning to become a little tardy with their payments, pointing them back to the clauses within your contract can be a simple way to get things back on track.  It does not have to be used as a big stick, but people are sometimes forgetful and paying your invoice may fall somewhat down their priority list.  If your friendly reminders do not get you anywhere, then it may be necessary to refer to the contract.

Remember – speak to your lawyer.  These standard terms and conditions can be written for under $2,000 and are a valuable part of your business.

Does your business have terms of trade? How do you use them?

05.04.09

The unofficial top 5 tips for starting and growing a business

Posted in Business Tips at 3:10 am by matt

As PeopleHub enters its adolescence as a business, we thought we’d reflect on some of the key things that have got us to this stage and share them with you to assist you in your business.

The mechanics of starting a business are well published on several Australian government sites.  So rather than reproduce some already excellent information and advice, we’d thought we’d provide you with our top five considerations when starting a business.

  1. Do something you love  – This is one old chestnut that gets trotted out by everybody who has written a motivational or self-help book.  It is almost a cliché, but the simple fact is there is no such thing as “Mondayitis” if you are doing something you believe in and are passionate about.  In all honesty, PeopleHub was not founded to be a payment business, we are passionate about helping small business and by providing a reliable and flexible direct debit solution we are achieving exactly what we set out to.
  2. Map out your business model – I cannot believe how helpful this is to a start up.  The business model explains how you take the inputs to your business, convert them into a product or service that is of value to a market and then get paid for them.  There is a great episode of South Park where the gnomes are starting a business selling underpants; their business model is reflected in this picture .  At the very least your business model will help you develop the assumptions with which your financial projections are based.  And the great thing about documenting your assumptions is that you can revisit them if your business is not performing how you expected it to.
  3. Put together an official board or ‘friends of the company’ – The Napoleon Hill classic “Think and Grow Rich” describes the establishment of a “Master Mind Group.”   In principle these are people who have specialist skills and knowledge in areas you do not.  At PeopleHub we have a group of mentors that we share information about our business and obtain their feedback.  This has been extremely useful in identifying other revenue opportunities, getting the company structured right and generating new ideas that we simply could not have developed on our own.  Through our mentor meetings, we discuss strategic issues and generate an activity list that we go away and work on.  We provide feedback on the progress that list of activities at the next meeting and then move onto the next part of our business.
  4. Understand whether you are selling plain milk or flavoured milk.  This was one lesson that took us a long time to learn.  Yes, you want to be a client focused organisation and yes you do want to offer good customer service, but all of these things need to be considered in terms of your pricing strategy.  Virgin understands that it sells white milk or a no frills product. If you want to watch the little TVs in-flight, then you pay extra and if you want to eat a packet of chips, you pay extra. On the other hand if you are flying QANTAS, all these little ‘extras’ both in terms of service and product are seemingly provided free.  The trade-off is, that you will generally pay a higher ticket price when flying QANTAS. In the end, you are not doing your customers or your business any favours by over-serving and under charging them. The reality is, in most cases, it is not sustainable.  We’ve found that when you offer your customers a fair price and are upfront about optional extras they may be interested in, both you and your customer wins.  You can earn a return on your effort and your customer enjoys that additional flexibility or utility of the product extension.
  5. Always look for ways to improve your business – The successful businesses of today were not the same 20, 15 or even 5 years ago.  While it is easy to poke fun at a business like Microsoft, they are embarking on a series change to their business.  They have dominated the desktop market for the best part of 15 years.  They are now focusing on ‘search technologies’ and web-based software products because they believe those areas represent the future.We are always debating what will make our customers more successful.  The 3 areas we focus on are; giving you more time, more money and more flexibility.  We are constantly developing concepts around these areas and the PeopleHub of 2014 will be much changed from the PeopleHub of 2009.

What are some of the lessons you’ve learnt in business?  We’d love to hear your stories, so please take the time to comment on this blog and share your stories.

Avoiding the pitfalls of direct debit (Part 1)

Posted in Business Tips, Direct Debit at 2:59 am by matt

While it may seem strange for a payment company to spell out the risks of direct debit, we believe it important to provide a balanced view of some of the difficulties that can arise.  By understanding some of these issues, your business will be able to better navigate the traps of what is otherwise an excellent method for collecting your regular payments.

The first and most obvious issue with direct debit is that the account you are attempting to debit may have insufficient funds.  This is logical given direct debit is a biller initiated transaction; it is not possible to know whether sufficient funds exist prior to debiting the account.  Not only does a default require some action from you, it can also mean your customer has incurred a fee from their financial institution.

As a business there are several things you can do to reduce this risk, but they all essentially relate to communicating with your client:

  1. Ensure it is clear in the contract when payments will be debited and then provide a copy of that agreement to your client for their future reference,
  2. Send reminder messages to your client when a payment is about to be debited,
  3. Provide adequate notification of any changes to your direct debit clients, especially around public holidays when funds may not have been debited on the normal day the customer would have expected, and
  4. Align the payment date with your customers’ paydays.

Now, there are several businesses that will manage customer defaults on your behalf by sending letters and calling your customer, but the easiest (and most inexpensive option) to avoid defaults is to keep the communication channels between you and your clients open.  Remember, your customer relationship is the most important commodity to your business, manage that relationship well and you will not only reduce your defaults, you can avoid employing a 3rd party to manage your customer relationship.

One of the other drawbacks of direct debit is the payment or payments are contestable.  A customer can contact their bank and contest a payment on the grounds that (a) there is no authority to debit the account or (b) the transactions were not authorised (this could be the amount was not correct or there was a payment double up).   When this occurs the bank will request a copy of the signed direct debit authority, as well as any other supporting.  The most common issues experienced by our customers are:

  1. The customer has used their spouse’s account to make the payments without obtaining the spouse’s signature on the form.  Remember, it is the account holder’s signature that is required authorise a direct debit,
  2. The account details have changed and the business has not obtained a new authority for the new account details. By re-issuing the direct debit request form with the new account details, you are protecting business from having funds reversed from your account
  3. The biller is posting a reference to the customer’s bank statement that does not make sense to the customer.  Remember, your customer identifies money withdrawn from their account by reference on their statement, not the amount.  Keep the reference on the statement simple and relevant to your trading name or industry.

In the upcoming weeks, we will look at some other pitfalls to direct debit.