With prices rising and many of the COVID safety nets being removed, some businesses are slipping into the red. If you’re a supplier, this may mean you have a number of overdue accounts. At some stage, you are going to need to chase the funds.
There are a number of debt recovery options available to businesses in Australia. The most appropriate option will depend on the amount of debt owed, the debtor’s financial circumstances and your own business’ needs and preferences.
Take a look at some of the initial steps you can take, as shared by Crest Lawyers’ team of debt recovery lawyers on the Gold Coast:
Negotiate with the debtor
First things first, reach out and have a discussion. There may be a solution you can find between the two of you.
If you are considering negotiating with a debtor yourself, there are a few things to keep in mind. It is important to be firm but fair and to have a clear understanding of your legal rights as well as the debtor’s financial circumstances.
It’s better to be assertive, not aggressive. It is against the law to use intimidation tactics or threaten someone because they owe you money.
Send a letter of demand
You should first try to negotiate a payment plan or settlement. You could perhaps have your accountant or bookkeeper reach out on your behalf, or phone the account manager yourself to try to recover the funds.
If this doesn’t get results, you may send a letter of demand. The following tips will help you to write an effective letter:
– Make sure you are clear about the amount of money that is owed. Include any interest and legal costs that may be due.
– Give the debtor a reasonable timeframe to pay the debt. This will depend on the amount of money owed and the debtor’s financial circumstances.
It makes sense to work with a Gold Coast debt recovery lawyer when creating a letter of demand. If the client has the money but is holding onto it, a letter like this can prompt rapid payment.
Apply for a court order
For an amount less than $25,000 your next step is a visit to the Queensland Civil and Administration Tribunal (QCAT). This was established to help businesses recover money owed without losing it to legal support costs.
If the amount is more than $25,000, you will need to work with a lawyer to handle the matter via the Magistrates, District or Supreme court.
Use a debt collection agency
Struggling to recover debt on your own? Working with a debt collection agency may be the best option for you. Your debt collector will follow some of the steps above but because they are familiar with the process they can be much more efficient and persistent.
If you are considering taking action to recover a debt, you should get advice from a debt recovery lawyer first.
If the debtor is insolvent
Many people believe that a company is absolved of its debts if it becomes insolvent or the Directors file for bankruptcy. This is not the case. In fact, part of the process a company must undergo to restructure or become insolvent involves negotiating with creditors. The business may need to sell some of its assets in order to resolve its debts and while you may not get every cent you are owed, at least you can recover some of the money.
It makes sense to work with a debt recovery lawyer if one of your clients is in financial difficulty and going through a restructuring period because it will help you resolve the issue with less stress.
Avoid bad debts
As much as possible, ask your creditors to pay for your services or products upfront. This will save you from having to chase unpaid funds.
In addition to this, make sure you have a clear contract in place or have your clients agree to terms and conditions in writing so bills are not disputed and you have a clear path to a legal claim.
Need help to recover business debts? Reach out to the Gold Coast debt recovery lawyers at Crest Lawyers today.