Debt recovery

BUSINESS INFORMATION

Establishing a structured process to address non-payment and recover outstanding debts is crucial for maintaining cash flow, profitability, and positive customer relationships. Failure to receive payment for goods or services provided can significantly impact your business’s financial health.

Not being paid for the goods and services you have supplied will impact on the cash flow and profitability of your business.

Establishing a process to deal with non-payment and recover debt is critical. It is also important that the process allows you to maintain a good relationship with your customers.

To effectively manage debt recovery while preserving customer rapport, consider the following steps

Contact the Customer

Reach out to the customer as soon as their invoice becomes overdue. Determine if there is a valid reason for the delay and negotiate a revised payment deadline if necessary.

Send a Payment Reminder

If payment is not received within the agreed timeframe or as per your payment terms, send a formal overdue payment reminder. You can either draft your reminder or use a customizable template, such as our sample overdue payment email.

Issue a Letter of Demand

If payment remains outstanding, consider sending a letter of demand. This document should specify the overdue amount, the payment deadline, and the consequences of non-payment. Retain a copy of the letter and send it via registered post to ensure proof of delivery, which may be required if legal action becomes necessary. You can create your letter or adapt our sample template.

Tip

It is unlawful to employ harassment, coercion, or misleading tactics when collecting debts. For guidance on debt collection practices and legal obligations, refer to the Australian Competition and Consumer Commission (ACCC).

Seek assistance

If the non-payment stems from a dispute regarding the goods or services provided, and the customer is a business or government entity, consider utilizing a dispute resolution service. This can help resolve the issue without resorting to court proceedings.

Hire a debt collector

Hiring a licensed debt collector can be an effective way to recover unpaid debts. They will act on your behalf and typically charge a fee or a percentage of the amount recovered. In Western Australia, debt collectors must be licensed through the Department of Energy, Mines, Industry Regulation and Safety. You can search for licensed collectors via the Institute of Mercantile Agents.

Start legal proceedings

If all other efforts fail, legal action may be necessary. Before proceeding, evaluate the likelihood of recovering the debt, the time and resources required, and the associated legal costs. In Western Australia, the appropriate court for debt recovery depends on the debt amount:

Magistrates Court: Handles minor claims (up to 10,000) and general claims (up to 75,000).
District Court: Deals with claims up to $750,000.
Supreme Court: Handles claims exceeding $750,000.

Read our guide on Recovering a debt through the Magistrates Court for more information