Insights / June 28th, 2022

How can you achieve a swift debt recovery process? A guide for companies providing goods and services.

If your business is struggling with debt recovery, there are steps you can take before entering into transactions to ensure that recovering debts will become an easy process.

Chasing unpaid debts can be a tedious and costly undertaking for any business. Many Australian businesses have experienced cash flow problems recently as outstanding debts remain unpaid. The evasive nature of some debtors often leads to increased costs for a business, as considerable time and resources are spent locating a debtor’s whereabouts and determining their identification details.

One of the common difficulties we see that business is faced with in recovering debts is ensuring they have the correct legal entity and details of that entity to recover the debt against.

By implementing a rigorous but simple process of obtaining important details before entering into a transaction, a company can reduce this risk and drastically improve the efficiency of the debt recovery process.

Individual contact details

One simple way to ensure an efficient recovery of debts is to record the other party’s up to date contact details such as their full name, address, phone number, email address, and date of birth when starting the trade relationship. This will save a significant amount of time tracking down their location and contacting them to pay, which can reduce overall legal costs and time. If accurate records are taken, this also allows a company to have more debt recovery options.

Company details

When entering into transactions with a company, it is imperative to obtain the correct legal entity name including the ACN or ABN connected to the company, as this will assist in identifying other important information such as the directors of the company. In the event of non-payment, the correct entity can be easily identified and arguments avoided about invoices being issued to the incorrect legal entity as a means to avoid payment. This, in turn, will prevent issues in the event that recovery action is required.

Important trust information

It is becoming increasingly common for trading trusts to be used in business. Often businesses require that only the name of the trust be identified. However, a trust is not a legal entity and it is the name of the trustee of the trust that is relevant. It is important to obtain the full name of the trustees, together with any ACN and ABN details that are relevant. Quite often businesses do not have these details, and without details of the trustee it is difficult to progress the matter to legal proceedings for recovery of the debts.

Follow up debts in a prompt manner and be aware of time limitations

It is also best practice to follow up the debt as soon as it becomes payable. This means sending initial reminders to the debtor by phone, email, or posting a letter. Prompt follow up reduces the likelihood of the debt not being paid. The longer the debt remains unpaid and not followed up, the more difficult it is to recover.

Promptly following up the debt also prevents any issues with time limitations. The time limit to pursue debts must be within six years of the date from when the debt was first due. As a creditor, being aware of time limits is important to ensure that you do not rid yourself of the opportunity to enforce the debt.

Key takeaway

Being diligent when conducting business with customers is important to avoid unnecessary problems. Taking conscious efforts to ensure that customers and clients first provide their complete and relevant details before any business dealing and sending payment reminders will be of great benefit to your company if the time comes to recover that debt.

Cowell Clarke has years of experience in providing an efficient and successful debt recovery process at a fixed fee. If you would like to discuss how we can help your business manage and improve debt recovery, please contact us and a member of our debt recovery team will be in touch.

This publication has been prepared for general guidance on matters of interest only and does not constitute professional legal advice. You should not act upon the information contained in this publication without obtaining specific professional legal advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication and to the extent permitted by law, Cowell Clarke does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting or refraining to act in relation on the information contained in this publication or for any decision based on it.

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