This is one of the main questions a business asks themselves when they have outstanding invoices. What can I recover? What are my rights when it comes to collecting debts? At what point should the services of a debt collector be engaged? Approaching the debt in a fair & reasonable manner & finding a solution that suits both you & your debtor, will help to maintain a mutually beneficial relationship moving forward. Before you engage an debt collector, these are a few things you might want to consider:
As long as you have the appropriate terms and conditions or a signed agreement in place between you and the debtor you should be able to recover all debt collections costs, solicitor fees, late fees, admin costs and interest fees. However, without clear terms and conditions in place, you may not entitled to charge the debt collection costs or any additional costs to the debtor.
The right debt collection agency can assist you with putting in place the efficient terms of trade for your business. The main objective of a debt collection agency is to work on your behalf and get the full amount of your debt paid for you without incurring additional costs.
The statutory limitation period to chase the debt is 6 years in most States in Australia from the following dates:
The longer you sit on the debt and do not contact the debtor for payment the harder it is to recover the debt. Even waiting 90 days without payment can hinder your business and less likely to get your money back.
Ideally, to maintain the relationship, your first step once your invoice is overdue is to just pick up the phone and calling the debtor. Some businesses aren’t purposely avoiding paying, they may have just overlooked the invoice being received. Just giving them a courtesy call, can ensure you maintain the business relationship you established with them. When making a phone call to the debtor:
Once the phone call is finished, review your notes and forward the debtor an email outlining the verbal discussion and agreement made. This will cover you down the track should the debtor fail on the agreement made.
If the debtor is refusing to make payment or return your calls or emails, your next option moving forward is to instruct a debt collector to act on your behalf. Just a letter or phone call from a debt collector can prompt the debtor to make the payment or make a payment arrangement as the debtor knows that you mean business and have taken it to the next level.
A debt collector also has the resources and knowledge to chase the debt on your behalf to give you peace of mind knowing your matter is being looked after without the stress, frustrations involved and taking the emissions out of the equation. They are trained professionals that instructing them to act on your behalf increases your chances of recovering your debt.
In most circumstances, the debtor will not want the matter to go to court which will incur additional costs and interest to both parties and will work with the debt collector. If the debtor refuses to communicate with the debt collector your only option moving forward with your matter is issuing legal proceedings.
All cases are different in the debt collection world and can vary depending on if there is a dispute or if any communication is received from the debtor. Once the first letter of demand has been sent to the debtor, the debtor may make payment within the 14 day period.
Depending on the communications received from the debtor, the debtor may negotiate a payment arrangement which will see your debt being paid by regular instalments.
If all attempts have been made by the debt collector (about 2 months) a letter of demand is sent out to the debtor threatening legal action if not paid. If the debtor is unresponsive, then your only option moving forward may likely be legal action.
Compared to other debt collection agencies who only send out a letter of demand and make one phone call, at Dynamic Commercial Collections we have a three stage process when chasing your debts from forwarding letters of demand, phone calls, text messages and email demands.
This is to ensure that all processes and attempts have been made to the debtor before any further decisions are made.