Debt Recovery for Small Businesses

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

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

Secondly, if the relationshippermits, you should informally contact the debtor to enquire as to the statusof payment. They may have simply forgotten particularly if the invoice waspayable on terms, for example, within 30 days.

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

The amount owed to you will determinewhich 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 insome cases the Victorian Civil and Administrative Tribunal.

You may then commence action throughthe appropriate court, and if successful, obtain a court order against thedebtor 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.