05.22.09

But wait….. there’s more – how to implement payment plans for your product

Posted in Business Builders, Customer relationships, Direct Debit, Growing Membership at 11:12 am by matt

We get enquiries from many different business owners about our payment solutions.  They suspect that we might be able to help them but don’t really know where to start and what the adoption of a payment plan type set-up might look like.  The truth is, payment plans have been around for years.  From placing a surfboard on lay-by when I was young to buying a set of steak knives from Tim Shaw, payment plans have been a simple and easy to implement strategy to make products more affordable.  PeopleHub’s direct debit system can make payment plans a real option for your business.  Below I’ll tackle some of the regular question.

How do I make sure I get paid?

You will note from a previous post on avoiding the pitfalls of direct debit that there are some risks of providing direct debit to your clients.  There are a couple of strategies that you implement as part of your payment plan or lay-by system.

1 – Don’t provide the product until you have received full payment. This is obvious I know, but with the proliferation of rent to own products, many products are provided upfront with payment collected over a period of time, with the option to purchase at the end of the rental period many customers expect to receive their product prior to payment being made in full.

2 – If you are in an industry where the product is supplied upfront and your costs recovered over time, it is essential for your business that you have your lawyer draft a clear set of terms and conditions that will protect your business from receiving part payment.

3 – Remember a direct debit request form is not a payment agreement. Many of our new customers signing up for a PeopleHub account think that by having their customer sign a direct debit form they have a contract.  This is not the case.  A direct debit authority gives PeopleHub permission to debit your customer’s account.  Your customer can cancel a direct debit authority at their bank, however if you have a signed contract, they will still need to pay you through some other means.

I survive on low margins, how can I afford PeopleHub’s direct debit solution?

Our direct debit solution is very inexpensive.  There are no set-up costs or monthly minimums.  At 88c per transaction, it is not a costly system and if used correctly, it will not only save you money in your accounts receivables, but will also provide a tool to grow your business.

You can actually implement PeopleHub at NO COST to your business.  Most people realise that the freedom to pay a product off over time will incur some additional cost and will accept PeopleHub’s transaction costs in order have that convenience.

A final word on direct debit and payment plans

Direct debit is a reliable means of accepting payment, but it is important you implement your system in a way that is also convenient for your customers.  You can do this by aligning the payment dates with their paydays and by providing email and SMS reminders of upcoming payments to your customers.  These simple strategies can asisst in reducing your failure rate and providing a lot of goodwill to your customer.  As a consumer, there is nothing worse than being overdrawn and then being debited.  Not only will you need to find the funds to pay your next installment, but you will more than likely have to pay a default fee to your bank for being overdrawn.

PeopleHub can assist you in providing this flexibility as well as reminders to your customers.  Call us to discuss our system and how direct debit may fit into your business.

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?