Debt Recovery for Small Businesses

Although being a business owner can have many benefits it can also come with a lot of trials and tribulations, with the biggest being customers with unpaid debts. Almost a quarter of small businesses that don’t insist on upfront payments are being made to wait more than a month to be paid. This can be hugely disruptive to cash flow as small business owners report they spend an average 12 days per year chasing unpaid invoices.

The first step in recovering an unpaid invoice from a customer or a bad debtor is to review the terms of payment or any contract you entered into with the customer.

Secondly, if the relationship permits, you should informally contact the debtor to enquire as to the status of payment. They may have simply forgotten particularly if the invoice was payable on terms, for example, within 30 days.

Where your enquiry is met with opposition, we suggest a formal letter of demand either prepared by you or with our assistance. If the debtor fails to make payment in accordance with the terms of the letter of demand, a final notice should be sent, notifying the debtor of your intentions to commence legal action.

The amount owed to you will determine which court you seek recovery of the debt through. However, for matters under $100,000 they will usually be heard in the Magistrates Court of Victoria or in some cases the Victorian Civil and Administrative Tribunal.

You may then commence action through the appropriate court, and if successful, obtain a court order against the debtor for repayment of the debt plus interests and costs.

If the debtor fails to pay the amount ordered by the court, you will then be required to enforce the court orders. There are various methods of enforcement including warrants to seize property, oral examination, and winding up of the debtor (if it is a company).

If you are currently experiencing issues with re-claiming your businesses debts, please contact us to speak with one of our experienced Litigation Lawyers.