If you are owed money and want to know how to recover money from your debtors, this article is for you.
We have created a guide to understanding the debt recovery process in Australia so that you know exactly what to expect at every stage.
Need honest and straightforward advice about debt recovery? We can help you recover money owed to your business. AANDI Lawyers provide a free initial consultation so you know exactly where you stand.
What is Debt Recovery?
When you provide a service or supply product to a business, and they neglect to pay for those services or products on time this results in an unpaid debt. The process of recovering those unpaid debts by making contact with a debtor through letters, email, phone calls and personal contact, is commonly referred to as debt recovery.
When debts remain unpaid for a period of time you can engage in debt recovery action. All debt recovery action is regulated by Australian Competition and Consumer Law.
- Debt collection can involve a number of different steps and approaches to achieve the ultimate aim of recovering payment from a debtor.
- Debtors have a responsibility to pay debts that they legitimately owe which means that necessary and legal steps may be taken to recover owed amounts.
You may wish to engage a debt collection agency to act on your behalf if a debt is difficult to recover.
Why do Debt Defaults Occur?
If someone does not pay this is known as being in default. People or businesses can default for a range of reasons, including insolvency, cash flow issues, simply ignoring it, or feeling aggrieved about your services or products.
- It is important to take a fair and realistic approach to debt collection, and to be flexible wherever necessary.
- While there are some instances in which debtors do act fraudulently, most people are honest and do want to meet their obligations when given the opportunity to do so.
Taking a flexible approach might mean that you make a payment arrangement where you allow a longer-term for repayment. You ultimately need to strike a balance between recovery while ensuring your debtor is not struggling to make repayments.
What is a Debt Collector?
A debt collector is a business or person who acts on your behalf in arranging for the recovery of a debt. You may wish to engage a debt collector for the recovery of all debts for your business, or you may wish to get a debt collector on board for debts that have taken a long time to recover.
- A debt collector is a professional whose business purpose is to engage in tactics for recovering a debt.
- Debt collectors have the capacity to make contact with a debtor and to even commence legal action if debts remain unpaid for a certain period of time.
Steps in the Debt Collection Process
Once a debt reaches the stage of requiring debt collection action, there are a number of steps that are taken to commence recovery. You may wish to undertake these steps on your own, or you may wish to engage a debt collection specialist to perform them on your behalf.
- The first step on noting an unpaid invoice is to contact the debtor with a reminder — either by phone, email or post — along with steps for how they can make payment. This can be done as soon as the agreed payment date passes.
- If the payment remains outstanding, or if there has been no contact at all it is appropriate to contact the debtor again with a call, email, or letter to remind them of payment. This is usually done when the invoice is 30 days late.
- A final notice for payment can be sent after attempting to recover through the usual channels. This is usually done after 45 days.
It always helps to seek legal advice as early as possible. That way, you will be on the front foot and ready to pursue your debtor in the Victorian Civil Appeals Tribunal or through the courts if necessary.
How do I stop bad debts from happening?
In some cases bad debts will happen no matter how thoroughly you check someone's background, but there are some key steps you can take to protect your interests before you contract your services.
- Do a background check on a business before you elect to offer credit to them. This might involve doing an ASIC search to find out if the business has had issues in the past.
- Set limits on how much your customers can purchase before calling for payment.
- State payment options and consequences of non-payment clearly.
- Stay in regular contact with your customers and ensure you foster a good relationship with them.
- Incentivise payment with a percentage off bills for on-time payment.
- Wait for direct deposit payments to clear before shipping any goods.
Doing your due diligence is essential. If you've had problems with being owed debts in the past, the team at AANDI lawyers can help you with practical help and advice for doing your due diligence.
Contact AANDI Lawyers to Recover Your Debts
Speak to AANDI Lawyers today for comprehensive advice on how you can go about recovering your debts. We are experienced in working with debts of all sizes and we have tailored costs structure as a solution to your debt recovery needs.