An Introduction to Debt Recovery in Australia

Author: Ian Aldridge, Progressive Legal

Cash flow is king and debt recovery is a such a major issue for small businesses in Australia. Most business owners have experienced the stress and worry of not being able to collect on past due accounts, and the uncertainty surrounding cash flow can be overwhelming. Fortunately, there are steps that small business owners can take to make sure they get paid in a timely manner. 

In this article, we’ll discuss how you can go about recovering debt in Australia, and what the best course of action may be for your particular situation. 

Debt Recovery: A Quick Guide

When a debt remains unpaid, it’s important to start the debt recovery process as soon as possible. The longer a debt remains outstanding, the lower the chances of successful recovery. 

Before pursuing debt collection, it’s important to understand your legal rights as a business owner in Australia. The Australian Consumer Law outlines the rights and obligations of businesses with regard to debt recovery. These include the right to seek payment from debtors, and the obligation to treat them fairly. 

Now, let’s take a look at the different debt recovery options available to small businesses in Australia. 

In-House Debt Recovery

For starters, businesses are required to provide written notice of the debt, and not attempt to pressure or threaten the debtor. Additionally, businesses should inform debtors of their right to dispute the debt, and their right to access free financial counseling services. 

You may go in-house when recovering smaller debts, and when the payment is overdue by a short period of time. This can be done through the use of letters, phone calls, emails, text messages, and other forms of communication. 

Debt Collectors

Engaging a lawyer can be a good option for businesses that don’t have the resources or time to pursue debt recovery in-house. Debt collector lawyers are experienced professionals with knowledge of the law and access to resources that can help you recover debt efficiently and successfully. They will typically take over the debt recovery process from start to finish, which can be a great relief for busy business owners. 

Unfortunately, some people or businesses might only pay their debts after they receive a letter of demand from a lawyer.  

When hiring a debt collector, it’s important to ensure you select one that is accredited and insured. This will provide additional security and assurance that the debt recovery process will be handled legally and ethically. 

Court Action

If all other attempts at debt recovery have failed, businesses may choose to pursue court action. This is usually a last resort, as it can be costly and time-consuming for businesses. 

Before deciding to take a debtor to court, businesses should ensure that they have sufficient evidence to prove the debt is valid. This includes providing written notice of the debt, any evidence of payment, and copies of invoices to prove the debt is due. 

Once a business has decided to pursue court action, they must ensure that the court process is handled correctly. This includes filing a statement of claim with the appropriate court, and ensuring all paperwork is completed and submitted in a timely manner. 

If the debtor is a company, you may be able to serve a Statutory Demand  if various conditions are met. Otherwise a properly drafted Letter of Demand can be drafted by us which we find often has a high rate of success, given some people simply won’t pay a debt until they either get a letter of demand by a lawyer or a Statement of Claim.

Other Options

Dispute resolution processes can also be used to try and resolve the disagreement without going to court. These types of processes allow the parties to negotiate in a fair manner and come to an agreement that works for both sides. Whether it be through mediation, arbitration or conciliation it is important to go into the process with realistic expectations as to what can be achieved. 

Conclusion 

Debt recovery can be an arduous process for small businesses, however, there are several options available that can help. It is important to understand your rights and obligations under the law when engaging in debt recovery, as well as the different options available to help you recover outstanding debts. 

Progressive Legal is here to help businesses navigate the debt recovery process successfully. Whether you going the in-house route or engaging a debt collector, we can advise and support you throughout the process. Contact us today for a consultation, and to learn more about how we can help you recover your debts. 

Phone: 1800 820 083