Unpaid invoices can be the silent killer for small to medium businesses. According to statistics, about 90% of small businesses in Australia fail to exist due to poor cash flow as they fall victim to the payment practices of large companies and even the government. Such big players may bargain on unfair payment terms in contracts or simply not comply with agreed payment terms in order to get interest-free loans in form of late or unpaid invoices. Having to chase accounts receivables can have a big impact on the health of a business. The task keeps finance departments busy as some estimate that it takes about 12 days in average to get an invoice paid that was already due and such accounts receivables are also the reason why 27% of small businesses are forced to go into debt in order to pay their suppliers and staff wages. For any business no matter its size, it is, therefore, crucial to collect the debt as soon as possible to keep the positive cash flow going and the business alive and prospering. The timeframe you have to recover debt depends on the state but in general, you have six years to collect a debt from the date the debt was first incurred, the last payment was made or the customer admitted in writing to the debt. Depending on the type of debt, the Northern Territory reduces the timeframe to 3 years or can go up to an additional 12 years depending on the state if you successfully gain Judgement after suing a debtor.
A lot of businesses cannot afford to wait for payments for a length of six years and most of them don’t have the time or the skills to devote to accounts receivables over such a long period. While you have legally six years to collect outstanding payment, it is vital to have a plan at hand how to collect the debt as soon as possible. This is why a lot of Australian businesses now hire a collection agency to retrieve the money as research shows, that the longer a debt remains unpaid the harder are the chances of recovery.
A good collection agency will not only help you to retrieve outstanding payment but work with you to minimize the risk of overdue payments in the future by going over your terms of trade. Debt prevention is important to save time and money and can be done by the help of a debt collection software which allows you to keep track on accounts receivables by managing client’s payment plans to keep your accounts organized and maintained and reminds you of upcoming payment due dates. Furthermore, a professional will be able to issue formal letters to make sure your debtor understands that you are serious about chasing the outstanding debt. By involving a third party to get your invoice paid, lots of stress will be removed from your staff, which can then focus on their daily tasks instead of chasing delinquent clients on the phone or via email. In most cases, the letterhead of a debt collection agency is enough to persuade debtors to pay the outstanding amount with the help of a letter of demand after all other attempts to retrieve the debt have been exhausted. A letter of demand is the last resort before taking legal action and usually issued by a third party. Its aim is to seek payment for a debt owed and asks for settlement of the outstanding amount, commonly within a period of 14 days. At receiving such letter the debtor is also warned that the creditor is willing to take legal action to satisfy the demand, this is why such document should not be sent lightly as it can seriously harm the business relationship with the client.
If you have any unpaid debt or would like to consult a professional on this matter, feel free to get in touch with debt collectors Sydney today.