Professional Recovery Services Australia & New Zealand

How to achieve the best results in debt collection

Debt Collection best results guide

You have tried your best to reach out to your client and to recover the debt owed to you. Alas, with no luck you have to move the debt collection to the next stage. But what exactly is this next stage, and how can you manage it to get the best result?

Debt Collection- Set yourself up for a positive result

Surprisingly, the first step before actually engaging any legal action is to set yourself up in the best eyes of the law. What does this mean?
● Send a reminder to the client that they have forgotten to pay. Ensure that they are not just forgetful and that they have deliberately not paid or have been unable to pay you.
● Follow the steps outlined in this article to ensure that you have understood the debt (see 4 Practical Ways on How to deal with bad debt for every business owner).
● Send them a message by all communication methods, be it by email, phone and letter. You want to ensure that it is evident that they have the message and that it has not ‘become lost in their inbox’.
● Approach them for a soft negotiation to see if you can come to an alternative agreement for payment. Perhaps they pay over instalments or you could negotiate a different rate. Make it very easy for them to pay you and offer various payment methods.

Once you have completed the above, there can be no question that you didn’t try every practical way to reach out to your client. You have been more than fair to them and that at this point, they have no intention (or cannot) pay you.

Issue a letter of demand

The next stage is to issue what is known as a letter of demand.

According to the ACCC (Australian Competition and Consumer Commission), a letter of demand is defined as:

“A letter of demand states how much the business owes you, what for and when they need to pay the invoice by. It may also include a warning that you’ll consider legal action if the debt is not paid by a particular date”

You can get a template of the document here.

To write a letter of demand, you need to know several things.

  1. Who is the owner of the business? They will be on the hook to pay you. It might not be the original manager who engaged you. In Australia, you can find this by looking up the ABN registry who will list who owns the business.
  2. Attach any supporting copies of documents, like your initial contract.
  3. Ensure that the letter of demand is accurate. You don’t want anyone stalling by saying that the letter does not address the right firm or for the right amount.
  4. Sign and date the document, and send it via registered post. You want to ensure that you tick the ‘sign on delivery’ option just in case you need this for evidence later.

You will hopefully get paid at this stage (as most businesses know that you are now serious), but if you are not, you can move onto the next step.

Engaging experts to recover the debt

A letter of demand is only good as the threat of legal action to back it up. At this stage, all options have failed, and it’s time to bring in the professionals.

Consider hiring a firm like Professional Recovery Services to take on the mantle of your business and chase down those who owe you money. Knowing that your debts have been handed over to a professional company is an escalation beyond a letter of demand and will make your debtors think twice about not paying.

Plus, as a professional service will take over the matter from here, you can be confident in your debt situation, and you can return to doing what you do best.


Taking legal action

If you have decided to go it alone and not engage professionals to recover the debt, you will need to take legal action.

This will either involve hiring some lawyers to advise you or represent you (which can be expensive) or filing a claim yourself at Court. You will need to be prepared for what will come.

First, if you register a claim, you will need to be prepared to showcase your business (and practically put yourself on trial) as well as all the details involved in the case. If you don’t feel comfortable having your name and business on the public record, it might be wise to hire representation on your behalf.

Once you have made this claim (called a Statement of Claim), the debt party will have 28 days to file a notice of intention to defend and defense. If they do not, then you can file for a default judgement.

If the client does file a notice of intention to defend and defense, the next step is for you to prepare and file a reply, then you need to prepare for your day in Court! Good luck and be faithful to the facts.

Bottom line

The first step in recovering any debt is knowing the pathway to a successful resolution and the confidence that comes with knowing what the next step is. Alas, even winning a court case, in the end, is no solid guarantee that you will get paid, only that the law has sided with you. From this point, you will need to look at options to enforce your claim. If you need

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