Debt collection in Australia is something that most—if not all—companies undertake at one point or another. Yet, this process still has an air of mystery around it as many business owners are reluctant to discuss it.
Here at Slater Byrne Recoveries, we believe that the more you understand the process, the more you’ll be able to make better decisions for your business. So in this article, we will be answering some of the most frequently asked questions about debt collection in Australia:
Will it ruin my customer relationships?
No, debt collection does not ruin customer relationships. Debt collection is a way for you to recover debts that your customer left unpaid. Slater Byrne adheres to the highest standards of ethics and the guidelines for collectors and creditors in our debt collection process. Thus, you can be assured that we do our debt collection the proper way.
Debt collection does not negatively impact your relationship with your customers. If anything, it will help improve the way you communicate with your customers, and, hopefully, improve your customers’ payment terms.
Is there only one way to collect debt in Australia?
No, there are several ways to recover debts in Australia. There is what we call court debt collection where you file a legal action when debtors owe money. There is also the non-court debt collection process where you do the collecting or where you hire a debt collector as your agent.
Debt collection agencies also differ in terms of focus. Some agencies focus on collecting large debts for large corporations, while some specialize in collecting debts for small- and medium-sized enterprises (SMEs). All you need to do is choose the best one for your business.
How much does debt collection cost?
The amount of money you will spend on debt collection services depends on several factors, such as:
- the type of debt collection service your business need,
- the age of the unpaid debt, and
- the firm’s commission rate.
Usually, the older the debt is, the higher the collection fee. Most debt collection firms ask for 5 to 30 per cent commission upfront. At Slater Byrne Recoveries, we simplified the process by eliminating the payment of commission fees unless and until we recover the debt. You only pay us when we successfully recover your debt.
When is the best time to pursue a debt?
We suggest that you should start the debt collection process the moment an invoice becomes overdue. Generally, the invoice becomes overdue when your customers exceed your credit terms or the agreed period for payment. To illustrate, if you have a 20-day credit term, the invoice becomes due 20 days after you sent the invoice out.
You can start your debt collection process by calling or sending out an email to remind your customers of their outstanding debts. If despite repeated reminders, the debt remains unpaid, then it is best to follow up with a letter of demand. If your customers are refusing to pay and they have exceeded your credit terms – act immediately. The faster the account is handed to a collection agency, the better the result!
Can old debts still be recovered?
Yes, but there is a statute of limitations. Simple contracts have a statute of limitation of six years in most of Australia. It is three years in the Northern Territory. When the debt has already passed the statute of limitations, you can no longer make a claim and take it to court. Or if you pursue the debt in court, your debtor will have a valid defense not to pay it. If the debt is considered “statute-barred,” it is best to consult a legal advisor on your remedies on how to pursue these debts.
Is using a debt collection agency better than using a law firm?
Debt recovery can often be a complicated matter. While there are debt collection cases that can be handled successfully by debt collection agencies or by in-house debt collectors, some cases will also need you to consult a commercial dispute solicitor so that you have a clearer picture of your debt situation and to give you a better idea on how the case will pan out should you decide to pursue it legally.
I am not in Australia, can you recover debts from an Australian company?
Yes, we recover debts for overseas clients. We have served numerous clients from around the world who have debtors located in Australia. To give you an idea of how we do our overseas debt collection, we have a case study on a client from Oklahoma City in the U.S. and a case study on another overseas client where we used a garnishee order to successfully collect unpaid debts in Australia.
Do you recover debts from debtors based in New Zealand?
Yes, we recover debts from debtors in New Zealand. We have a license to collect in New Zealand. We also have an office located in Auckland.
What happens if you fail to recover the debt and I don’t want to escalate any further?
We will close the case file at no cost to you.
What is your debt collection success rate?
As much as we would like to recoup 100% of the debt 100% of the time, that is not possible due to certain circumstances that are often unique to the case. We estimate that our debt collection success rate is at around 85%.
If you have more questions about debt collection in Australia and Slater Byrne’s debt collection process, please go to our FAQ page. If you still have more questions, don’t hesitate to call us or give us a chat.
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.