Recovering your debts during these unprecedented times can be critical to the survival of your business. You must consider each debt and your strategy for recovery on a case by case basis. While it is important to recover your debts, you do not want to be left throwing good money at an unrecoverable debt. Debt collection takes place when creditors and collectors seek to secure payment from consumers or businesses who are legally bound to pay or to repay the money they owe. Any organisation involved in recovering a debt must be aware of its legal obligations.
Regretfully, chasing outstanding invoices can be draining, both financially and emotionally. It can lower staff morale and even damage your brand reputation, if not carried out with professionalism. When an invoice is overdue, rather than sending another reminder email or an angry letter, a better approach is to be proactive, pick up the phone and take the opportunity to connect with your customer. However, most people won’t do this because it's too confronting for them. So, for any companies that are trying to collect their debts at the moment, it’s important to think about your approach—and the real cost to your business in the long run.
When you try to collect the debt, under Australian law, a debt collector must not: • use physical force or coercion (forcing or compelling the debtor or a third party, such as a family member, to do something) • harass or hassle the debtor to an unreasonable extent • mislead or deceive the debtor (or try to do so) regardless of intention • take unfair advantage of any vulnerability, disability or other similar circumstances affecting the debtor (this is an example of unconscionable conduct).
Note: Since 25 March 2020, new rules have been in place to provide temporary debt relief for financially distressed individuals and businesses due to the economic impacts of COVID-19 (coronavirus).
During these uncertain times, if you're looking for the best lawyer in Sydney CBD, NSW, Jeffrey of JCL Legal is available by mobile phone. Please call him on 0419 233 670.
Regretfully, chasing outstanding invoices can be draining, both financially and emotionally. It can lower staff morale and even damage your brand reputation, if not carried out with professionalism. When an invoice is overdue, rather than sending another reminder email or an angry letter, a better approach is to be proactive, pick up the phone and take the opportunity to connect with your customer. However, most people won’t do this because it's too confronting for them. So, for any companies that are trying to collect their debts at the moment, it’s important to think about your approach—and the real cost to your business in the long run.
Negotiating an Outcome
One of the best ways to recover a debt during economic uncertainty is to negotiate a mutually acceptable alternate payment arrangement with your debtor, such as: • a deferred payment; or • payment by instalments. Negotiating can not only save you considerable time and money, but it can also help you preserve business relationships that may become invaluable in the future.What To Do If A Customer Refuses To Pay
In deciding whether to pursue debts, you’ll have to weigh up how much is owed, the cost and time it will take you, and whether the business you are chasing has the ability to pay the debt. If your customer refuses to pay or doesn’t return calls, get legal help to recover the outstanding invoices.Formal Debt Recovery Process
If you are unable to negotiate a mutually agreeable arrangement with your debtor, you may be left with no option but to commence a formal debt recovery process. Commencing formal recovery action will inevitably damage a business relationship. You must consider the long term impact on your business relationship prior to commencing formal recovery action. This is particularly crucial if you wish to continue trading with the other party once the economic environment has improved.Letter of Demand
The first step in the formal recovery process is to issue a letter of demand to your debtor. A letter of demand is a formal request that you send to your debtor demanding they pay your outstanding invoice(s). Letters of demand are commonly sent by legal representatives to add more weight to the demand. They are also generally the last formal communication with the other party prior to commencing Court proceedings. A letter of demand should include: • the exact amount they owe you; • why they owe that amount; • when they need to make payment by; and • what will happen if they do not make payment by that date (e.g. threatening to commence Court proceedings). If your debtor fails to respond to your letter of demand, you can either: • send a final demand which provides your debtor a further seven days to make payment; or • commence court proceedings.Commencing Court Proceedings
Court proceedings can be a time consuming and expensive process. As such, this should be your last resort to recover a debt. This is even more important in times of economic uncertainty. Before commencing court proceedings, you should consider several factors, including whether: • your business can afford to incur the costs associated with litigation; • the amount you are attempting to recover is proportionate to the time and expense of going to court; • your debtor has the means to pay the debt if the judge finds in your favour; and • your debtor will likely enter administration, liquidation or bankruptcy. Even once a judgment has been found, it still may be necessary to take some form of enforcement action before ultimately recovering the debt. There are several enforcement actions available, including: • having the Sheriff seize their property; • garnisheeing funds from your debtor’s bank account; • having your debtor wound up in insolvency (if they are a company); or • having your debtor declared bankrupt (if an individual).Illegal Behaviour When Contacting A Debtor