A good cash flow management and debt collection process acts as an elixir for the survival of any business, especially small and medium enterprises (SMEs). One of the significant parts in business operation is to ensure that debtors pay their bills on time. There is a risk of exhausting your operating capital and compromising on the ability to pay operating expenses such as payment to creditors and staff. To mitigate this risk, effective and efficient credit control is required.
There are myriads of ways to handle customers or debtors who are not settling their invoices on time. You can either make some arrangements internally or outsource the time-consuming job to a third-party collection agency like us to do the job for you. As a prerequisite, understanding specific debt collection laws in Australia plays an important role.
A set of guidelines is developed by Australian Securities and Investment Commission (ASIC) and Australian Competition and Consumer Commission (ACCC) that should be adopted by the debt collection companies during the collection process. The guidelines cover the following main points:
The Debt Collection Guidelines is quite a large document, so we have decided to drill down to the practical debt collections process which is in alignment with the collection guidelines for the companies in Australia. The process includes the below points:
It is important to note that a professional debt collection & recovery agency has a proven and well-established process in place which can be customised to different situations or businesses based on their needs and requirements. Since each business is different, a customised process makes the debt collection more effective and efficient.
The first step in the debt collection process is to contact or notify the debtor about their pending invoices which can be achieved with a very simple letter or a phone call. On the occasion of being unsuccessful in contacting or notifying the customer, you can use formal proceedings to speed up the process by sending a ‘Letter of Demand’ letter, which is a formal debt collection letter.
A ‘Letter of Demand’ is the last step to notify the debtor about the pending invoices to be paid before engaging a debt collection agency to take further recovery action which may include listing a default of the debtor’s credit history and or issuing legal proceedings. Please refer to the sample debt collector letter from our experts.
If the debtor fails to settle his invoice after the ‘Letter of Demand’, you can issue a complaint or claim on the debtor, which can be performed by a debt collection and recovery agency like us. This requires a lawyer who is experienced in preapring and issuing claims in relation to outstanding debts. This job is best fit for a debt collection agency as they retain skilled and experienced lawyers to do the job for you. Also, please refer to the sample issue of complaint letter.
Service of the complaint is effected by post or personally at the debtor’s business or residential address. If the debtors fail to respond to it, the court can proceed with a court judgment in favour of the creditor.
The court gives an option for the debtor to make appropriate payment arrangements. However, if the debtor fails to make arrangements, the debt collection and recovery agency can use other options such as warrant to seize assets, winding up petition, and issuing a bankruptcy notice.
The debt collection guidelines provided by the government aim to protect the interest and rights of debtors, but it also ensures to protect creditors who are chasing the bad debts owed to their business. The decision of writing off the debt can be made, if the business or the debt collection agency fails to recover the debt.
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