The Australian Competition and Consumer Commission (ACCC) implements strict guidelines on debt collection; you’ll have to abide by regulations even if a client’s payables are well overdue. This means that you have to be diplomatic with the negotiations, even if you really want to hang your debtor by the ankles and wring out all the loose change from his pockets. It’s tough to be on the collecting end of a bad debt, but you’ll at least have several methods of recovering it. Some businesses manage even with plenty of payables on the side, but you’ll have to admit that debts keep you up at night regardless of whether you owe or collect. Besides, everything’s probably in hindsight since the debt’s due date has passed. It’s time for payback and you’ll have to do the legwork.
Small claims court is a better option than a collection agency, especially if your claim is more a matter of principle than necessity. If the costs of hiring debt collectors exceed the value of the dues, then your efforts should be worth something on a small claims court. Involved parties don’t have to hire attorneys as legal counsel, and the court usually comes up with a ruling on the same day. Do note that small claims court applies limits to the value of claimable debts, though. This varies between states or cities, but you’ll probably consider the cap a trifle if you’re going after dues involving five to six digits. Small claims court is feasible if you’re collecting from individual clients or small businesses. Make sure you have concrete proof of the claim if you want the irrevocable resolution to yield in your favor.
If you’d rather be more diplomatic, then you can opt for mediation or arbitration instead. The fees are more affordable comparable to a small claims court since both parties will split the legal dues. Mediators try to strike a compromise both parties would adhere to; the agreement is written in black and white, with confirmation from witnesses. This is a swift (yet relatively inefficient) solution to the dispute, but the costs are affordable enough to consider. Arbitration implements similar procedures, but the arbitrator’s role is more authoritative. The latter considers the case and the appeal of both sides before coming up with a fair solution both parties may or may not agree to.
The most efficient method of recovering bad debts (without filing for legal damages) is to hire debt collectors to do the dirty work. This is even preferable for businesses based on loans and debts, such as car dealerships. Your claim has to meet set criteria to be accepted, though. Collection agencies use a handful of effective techniques to confirm the debt and hound the debtor, but they’ll only take in cases they can accomplish. The service also comes at a price, especially for high-risk cases. A collection agency can ask for as much as thirty percent of the recovered debt, which is a hefty amount for businesses in dire need of solvent funds. The cost is usually worth the service if you’re talking about large figures, though, especially in cases where the payable is well overdue and the debtor has to answer for the accumulated interest.
Australian Competition and Consumer Commission: http://www.accc.gov.au/content/index.phtml/itemId/7128
Small claims court: http://www.pinkinvestments.org/downloads/SmallclaimstribunalsofAustralia.pdf
I'm Louida from Atlanta, Georgia and I'm a mother of two daughters, and a full-time blogger/influencer.
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