Debt recovery: Get Your Money Before Christmas

With Christmas only 9 weeks away, now is the time to get ahead of those pesky debt recovery items on your to do list.

We all want to get paid for the hard work we do. The unfortunate truth is that more often than not, small businesses are the ones who fall victim to avoidance tactics when it comes to collecting money. If you’re a business owner, you’re likely to be familiar with the incessant excuses and false promises of clients and customers.  

But what then?

As always, you’re left with the only two options…

1.       Continue the chase; or

2.       Write-off the debt.

Taking the first step

When it comes to debt recovery, some business owners fatigue and write off debts just to free up their time and redirect their focus to income generating activities. Some debtors will play the corporate game of chicken, delaying payment as long as they can to gauge your intentions.

There is a common misconception that debt recovery is expensive and time consuming. The fact is that a high volume of matters resolve in the early stages, normally following a simple letter of demand or statement of claim. In undefended matters that proceed to Court, the legal costs and filing fees will form part of the claim and if successful, are recoverable along with the debt. This means that if you have a strong claim, there is a great chance you will not be out-of-pocket. It is important to speak with a lawyer and confirm the best course of action for your circumstances.

How you can recover your money

The question now is what you do with all those outstanding accounts / debts. With 9 weeks to go before Christmas, you have just enough time to run through the early debt recovery stages.

1.       Letter of demand

A letter of demand requests payment within 14 days. It states the grounds on which the debt is owed, the due date for the debt and advises the debtor that Court proceeding will be commenced in the event the debt is not paid.

2.       Statement of claim

A statement of claim is an originating process in Court. A copy of the document is personally handed to the debtor and they are provided with 28 days to either pay the debt or file the defence. Either way, a statement of claim gets the ball rolling.

What may surprise you is that a large number of claims will be paid once a statement of claim is issued. This includes the interest, legal costs and court filing fees.

3.       Default judgment

Assuming that there is no defence to the claim, you will be able to enter default judgment 28 days after the statement of claim is served if the debt remains unpaid. If the debt has been partially paid, you can still enter judgment for the balance.

Once judgment has been entered against the debtor, the Court will write to credit agencies and notify them of the unpaid debt. This will affect the debtor’s creditor rating when they apply for future loans and finance. It’s what is commonly referred to as “the black mark” against the name.

A default judgment allows a creditor to start enforcing judgment. The various methods of enforcement will be discussed next month.   

If you are tired of customers dodging your invoices, get in touch with Fern Lawyers today.