Debt collection can be one of the most challenging parts of running a business. This is not only because it’s a complex and often time-consuming process, but also because it can have a huge impact on your company’s overall financial health.
So, it’s important to make sure your debts are recoverable before you begin the collection process. You can do this by asking the following simple questions:
1. How old is the debt?
The first thing you must determine is how long the debt has been overdue. Then, you must refer to the statute of limitation for debts in your area. In Queensland and the rest of Australia, the statute of limitation for unpaid debts is 6 years. In the Northern Territory, the statute of limitations is only 3 years. This means that if no action or acknowledgement of the debt has been taken on a debt for over 6 years (or 3 years, if you are in the Northern Territory), then the debt will be written off.
2. Do you have the right contact person?
Next, you must make sure the person you’re trying to reach is the actual person in-charge of paying the debt. This may depend on the structure of the company you’re contacting. In some organisations, debt collection notices must be addressed to the head of accounts or even the business owner himself.
The key is to ensure your client records are accurate and up-to-date. If you see that your initial payment reminders are not getting noticed, call the company or do additional research to find out if you have the right contact person. It would also help to ask for a secondary contact at the beginning of your transactions with the client.
3. What if your debtor has become insolvent?
Learning that your debtor has gone into liquidation can certainly put a damper on your debt collection efforts, making the process more complicated. But all is not lost. There are still a couple of things you can do to maximise your chances of recovery.
One such action is to lodge the proof of debt form as soon as you find out your debtor has become insolvent. You may be required to submit different forms, depending on whether your debtor is being liquidated under the Bankruptcy Act or the Corporations Act. Submitting the right form and doing so promptly will increase your chances of getting paid.
Important Note: Minimise the risk of going through this hassle by communicating with your clients regularly. This way, you can determine if and when they are starting to struggle financially. This will help you plan ahead and come up with efficient solutions like a payment plan. Always being informed about your debtor’s financial status will also help reduce your risk of exposure to preferential payment.
Let Us Help You!
Still not sure how to handle your overdue account? Slater Byrne Recoveries is here to help! We offer a free consultation so that our debt recovery specialists can analyse your accounts and determine the most ideal collection strategy that will get you the results you want.
Get the debt collection process started now! Call us at 1 300 794 290 or send us an email at info@slaterbyrne.com.au.
Liam White joined the Slater Byrne Recoveries team in early 2013. He has worked across the credit & dispute resolution industry for a number of years. He is currently working in a Marketing/Head of Sales capacity at Slater Byrne Recoveries.