How small business can recover debt and improve cashflow

Australian small businesses maintain the balancing act of money in and money out.
Australian small businesses maintain the balancing act of money in and money out.

This is advertiser content from Access Law Group

Every small to medium business operates close to the line on its cash flow. For most, cash flow issues are an ongoing and unwanted management process – who has time to do it? However, when the balance of debts owed to you becomes more than your liabilities to creditors, you have to take action to increase your cash flow position. The most obvious but overlooked way to do this is by recovering the debts owed to you.

Chasing Debtors

Often the first point of call is to ‘chase’ the debtors by email and phone. Most people don’t like doing this but there are a few alternatives. One is to ‘sell’ the debt to a debt recovery agent who will help to manage the recovery process. Another is to engage Access Your Money, a division of Access Law Group. Access Your Money circumvents the debt recovery agencies and recovers your debts by delivering a no-frills, cost-efficient (often fixed costs) process to turn your debtors’ ledgers into cash at bank.

Letters of Demand

When a debtor does not respond to requests for payment the next step is to issue a letter of demand. This requires payment within a short period of time and should provide all outstanding invoices and payment options. Look at it this way – the easier it is for someone to see that they have a debt, and that it is easier and less expense for them to pay it, the more likely it is they will pay it quickly. Give them all the information they need so they have the means to do so on the spot.

Legal Proceedings

Unfortunately, not every dispute can be dealt with outside of court. This could be for many reasons including a lack of money on the debtor's part or an outright dispute of money owing.

If there is still no response to a letter of demand, proceedings must be commenced. This is a relatively simple process of setting out in a Statement of Claim the contract between you and your debtor, the services provided and invoices issued and the amount owed. You must claim your legal costs and interest in your claim as you are generally entitled to these from the time that proceedings are commenced. You can contact the court who will help you to file the Statement of Claim in the appropriate jurisdiction – essentially determined by the amount being claimed.

In our experience, the commencement of proceedings quickly resolves in non-disputed debts being paid, or at least a payment arrangement being entered.

Sometimes a debtor tries to defend a claim. If this happens, you must consider the merits of the defence, and whether your contract or the debtor’s actions can be argued to mean that there is no reasonable defence.

Once a Defence is filed, the parties must draft their evidence. The evidence sets out in first person speech the conversations relied on by you to allege a contract, services provided, and breach of the contract, and must annex the relevant documents you rely on (such as the contract, correspondence, and invoices).

If the matter proceeds to hearing, the evidence will be ‘tested’. You have the burden of proving that the debtor owes you money and the court must be satisfied ‘on the balance of probabilities’ that this is the case.

When debt recovery efforts go unanswered, it can be time to enlist the law.

When debt recovery efforts go unanswered, it can be time to enlist the law.

Judgment

After a hearing, the court will deliver judgment. If you are successful, you have various options to enforce the judgment. This includes issuing Garnishee Notices (for example, to banks or employers/sources of income who will be obliged to pay money held by them on the debtor’s behalf to you), publicly examining the debtor about their affairs, seeking a Writ over property (when the Sheriff attends at their premises to seize goods), or issuing a bankruptcy notice (if the debt is over $5000). A debtor can also enter into an instalment arrangement that is sanctioned by the court.

Access Your Money

Access Your Money does all of this for you, meaning you can stay focused on your business. We recognise the strain you are already under and offer highly competitive reduced rates with fixed costs for certain matters.

During the debt recovery process, we often identify simple procedures that our clients can put in place to make debt recovery easier and cheaper, and also to reduce the risk of bad debts accruing on their books. This includes reviewing your ‘back of house’ administrative processes, your terms and conditions, and such things as conducting due diligence and insisting on credit applications.

Think of it this way - you pay your mobile phone bill in advance each month. Why should your business suffer from extending credit to your customers?

Access Your Money provides a complete service from reducing the risk of bad debts accruing, to the collection of debts to improve cash flow. For further information on how Access Your Money can assist you, contact Tim or James on (02) 4220 7100, or email lawyers@accesslawgroup.com.au.

This is advertiser content from Access Law Group