Business Debt Collection – What you need to know

How do I protect my business from debt?

It is estimated that up to 80% of Australian small businesses loose upto %30 of their revenue on delinquent payments. So it is little wonder that there is a endless interest in debt collection and ways that you can protect your business from your customers who don’t pay you. We like to suggest a few helpful strategies which can help you to ensure that you are not caught by customers who exploit your business either by getting your services for free or taking goods without paying for them.

What are the intial steps?

1. Call

Sometimes these matters can be sorted out with a simple phone call. If the client has simply forgotten about your payment or was intending to send it but it has some how gotten lost in the ‘accounts department’ a call like this can help to resolve the situation and ensure that you keep a good client and a good business situation.

2. Letters

If you call three times and you are starting to realise that this person is unlikely to meet your verbal request for payment, then you will start to put your request in writing either by email (a reading receipt is a good idea is you want to know if they are reading their emails) or by a letter to their offical address. If they are a company, their official address is the registered office of their company. You write letter which slowly increase in their urgency which culminate in a ‘final letter of demand’ which give an ultimatum to pay or else face legal action.

3. Legal Action

The first step in any debt recovery legal action is to issue a statement of claim. The statement of claim is usually quite a simple document which is signed by a lawyer and states the nature of the debts and the damages you have incurred and requests that a court grant your application for relief based on the damage you have suffered. Normally, after a brief period if no defence is filed then the plaintiff can file a notice of motion for default judgment and obtain judgment against the defendant. Then enforcement steps like repossession and bankruptcy or winding up can result if the debt is still outstanding after a court has given judgment in your favour.

Other Options:

Criminal Prosecution

In some cases you will have a debt which is simply the result of fraud where someone has taken your money or stolen an item from property from you and you should contact the police if you believe that you are the victim of a fraud or someone stealing property from you. Often the culprits in a situation like this will be very difficult to catch but if they are convicted they will end up with a criminal record adn may face heavy fines or imprisonment which will focus the mind of even the most recalcitrant non-payers. However, there are also issues of the burden of proof in criminal proceedings. Also, the police will only generally become intersted in a case where the amount involved has reached quite a large amount of money but if you think criminal prosecution is appropriate, you should by all means seek prosecution as a viable alternative.

Debt Collection Letter Resources

• Commercial Debt Collection
• Small Business Debt Collection Collecting debts in a small business is crucial to cashflow and can make or break the business.