At some point in time, every business owner will have an invoice unpaid by a customer. When your business has not been paid what it is rightfully owed, what is the best debt recovery procedure? At what point do you find and appoint a debt recovery lawyer in Sydney to oversee debt collection?
What do you do when you are the customer being chased to pay an invoice, which is not validly-based?
The way you approach the debt recovery process will vary in each circumstance, but here are some general tips for small business:
- Do not leave “old” debts hanging around for too long – there is a six-year time limit on starting debt recovery court action;
- Do not completely ignore a debtor that disputes the invoice – a debtor with a genuine grievance about the goods or services involved will be far more motivated to start legal action against your business, or cross-claim against your business in any debt recovery proceedings started by your business;
- Collect information verifying that the goods and services invoiced were in fact supplied to the customer, and were of the type, description, quality and price as agreed to by the customer,
- Retain a copy of your business supply terms and conditions at the time, or the supply contract between you and the customer;
- Collect proof that the customer agreed to your business’s supply terms and conditions, usually a signed contract or the customer’s act of acceptance of your online terms and conditions at the time they placed the order with you;
- Make an effort to work together with a customer that does not dispute the debt, and try to work out a payment instalment plan that is mutually agreed and obtain a signed Admission of Debt from the debtor;
- Get legal advice before your business starts debt recovery proceedings in a Local Court by way of a Statement of Liquidated Claim against the debtor, so you can assess whether the costs and time that may be involved are worthwhile in the circumstances;
- Don’t hesitate to contact a debt recovery law firm to provide initial advice, and step-in and manage that process for you, especially if the customer says it will not pay an invoice due to:
- non-supply of goods, or
- the goods being faulty, or
- other problems with those goods or services, or
- a dispute about the amount owing.
Where to from here? There are a number of ways Stevensen Business Lawyers can help you.
- We can write the Letter of Demand to kick-start the process for you. Where you have already issued a Letter of Demand, but it has been ignored by the customer, we can takeover negotiations with the aim of settling the matter out-of-court, including by clearly setting out to the debtor the grounds of a court action against the debtor, if the debt is not paid promptly without a genuine dispute as to the existence of the debt or strong evidence supporting the debtor’s case.
- Where an agreement is reached with the debtor over the disputed debt, we can prepare the Deed of Settlement recording the terms of that agreement, so as to avoid the possibility of disputes later on as to what was agreed.
- If the matter does end up in court, we will draw on our experience as commercial litigators – we are well-versed in representing clients in highly disputed matters and with complex disputes between commercial parties. Even after court proceedings have been started, the case will not necessarily go as far as final hearing or trial: the parties may settle a dispute at any time prior to hearing. It is with this aim in mind that strong legal representation is paramount.
- If you have obtained Default Judgement or other court Judgment against the debtor, and still have received no response or have not yet recovered money owing to you, we can advise on seeking bankruptcy of an individual debtor or the winding up of a company debtor (through a Creditor’s Statutory Demand for Debt), or other practical debt recovery solutions. Avoiding bankruptcy and its consequences for an individual (outlined by the Australian Financial Security Authority or AFSA), particularly the disqualification of a bankrupt (by ASIC) from being a company Director, can be motivation enough for some individual debtors to negotiate a payment plan of the debt owing.
- As a creditor, you would need to decide if debt recovery action is worth pursuing against a debtor if the debtor is insolvent, or does not have sufficient recoverable assets, or already has a number of other unpaid creditors. You will also need to consider the costs of debt recovery proceedings versus the likely return.
Alternatively, if you as the customer of a business have a Default Judgement recorded against you for a debt or invoice you dispute or didn’t know about, assuming you act quickly, we can advise on alternatives such as we negotiate a settlement of your behalf directly with the other party (the creditor) or we file an application in the court to set aside Default Judgement.
Contact us, your Sydney business lawyers, to discuss your next step in debt collection so you are paid what is owed to you. Our starting-point is to consider and identify the debt recovery process most likely to maximise potential returns to you – and then prosecute that process for you strongly.more
Disclaimer: N.B. The articles published on this website are general information only and are not intended to be definitive advice on the subject area. They do not constitute legal advice and should not be relied upon as such. For legal advice relating to your particular situation, please contact us today and talk to a business lawyer.