In Australia, small businesses are owed $26 billion in unpaid debt at any given time. According to a survey of 508 SMEs by Intuit, the average small business is owed at least $13,200 every year. These alarming statistics emphasise the need for debt recovery companies to help businesses improve their cash flow and credit risk management strategies.
But why do so many businesses struggle with chasing unpaid invoices?
Poor credit documentation and a lack of systems or processes to pursue debtors are some of the main reasons. Without properly drafted terms and conditions that outline the expectations of the client (the rules of the game), businesses are left with very few options to effectively and legally pursue their debtors.
Companies who want to salvage the business relationship also struggle with confronting debtors. However, by refusing to confront the matter – they risk being taken advantage of by their client.
Fortunately, a professional debt collection agency can help overcome these issues.
When a debt is referred for collection, and a payment demand issued, there is a much greater sense of urgency about resolving the matter. Debt recovery companies use advanced workflows and other technology to ensure that debts are always actioned on time, so nothing ever falls behind. If a debtor commits to a payment arrangement, then it is important that they are followed up promptly if they fail to honour their commitment.
Nowadays, email and SMS provide instant communication channels between the agency and the debtor, almost completely eliminating the need to send a letter.
If a payment arrangement is approved by the client, then the collection agency has the skill to negotiate a plan that is workable, clearing the debt in the shortest possible time.
If for some reason you cannot locate your debtor, then the collection agency will have the tools and resources to firstly find the debtor and then issue a demand for payment. Sometimes the agency will recommend a field call, whereby a licensed agent will visit the last known address of the debtor. If they find the debtor is still there, a demand for payment will be made in person, and if they find that the debtor has left the address, they will make enquiries with neighbouring businesses to determine their whereabouts.
All these methods are effective, however if they fail to deliver a result, the next step may be legal action, and in many cases, simply the threat of a summons, is enough to get the debt paid.
The law in Australia requires debt collectors to conduct themselves in a polite and respectful manner. Debt recovery companies cannot harass, intimidate, coerce or threaten a debtor into payment. The penalties for such a breach are harsh, and in any event, rough tactics do not result in a better outcome. In fact, an experienced collection agency will not only resolve most of your outstanding debts, they will also help restore and maintain business relationships by preventing repeated late payments.
Effective and professional debt recovery services have the effect of changing customer behaviour whereby previously slow payers now prioritise a supplier’s payment simply because they know the supplier has an efficient mechanism to chase unpaid debts.
Debt collectors do more than simply demand payment of a debt. Experienced debt recovery companies have the skills to work closely with debtors to assess their capacity to pay and identify if the debtor is genuinely attempting to pay their debt. If the debtor cooperates with the agency, and discloses their income, assets and liabilities, then a satisfactory payment arrangement can usually be established.
If the debtor avoids or refuses to provide sufficient information to the collection agency about their assets, then the agency can undertake a range of company, property and directors searches to identify assets and keep the collection process moving forward.
The best way to manage a payment arrangement is to set up a direct debit from the debtor’s bank account. AMPAC can do this instantly over the phone, and take an up-front payment as a show of good faith and then establish recurring payments at an interval agreed between the client and the debtor.
A collection agency with the right technology can manage any number of concurrent payment arrangements, ensuring that if ever a payment is missed, they are straight on the phone to find out why.
Your credit documentation outlines the terms and conditions a client must adhere to, including how and when they pay for your products and services. If a breach in payment terms occurs because an invoice is not paid, your credit documentation supports the debt collection process.
Some debt recovery companies offer a document review service. They can assess and identify shortcomings in your terms and conditions, which can be revised to give you an advantage in the debt recovery process.
By having your documents reviewed by an experienced debt recovery company, you have a greater likelihood of getting paid.
Your terms and conditions establish ‘the rules of the game’, and when properly drafted, provide you with the protection you need to avoid writing off your debt.
Do you need assistance with collecting an unpaid debt? AMPAC Debt Recovery can help you. Call 1300 426 722 or ask us a question for information about our debt recovery services.
Do you have debt that needs recovering? Are you unsure on where to start? Contact AMPAC Debt Recovery for solutions today and speak to one of our qualified consultants to get you started.