Your Legal Options For Collecting Unpaid Invoices

One of the inevitable realities of business is finding yourself in the difficult position of having a customer who either cannot, or will not pay for the goods or services you have provided.

There are a number of legal avenues businesses can take to recovery debt, however before commencing any legal action, it is important that all reasonable steps have been taken to attempt to recover outstanding payments. These pre-legal steps include:

1. Friendly reminders
2. Overdue reminders
3. Final notice
4. Direct contact attempts

If these activities have failed to resolve your outstanding debt being paid, you must provide your debtor with clear verbal and written communication – warning that legal proceedings are the next course of action. You must clearly communicate that failure to pay the debt, in a set time period, will set the legal process in motion.

Undoubtedly, any legal matter requires a significant commitment of time, cost and energy. It is recommended that you seek professional help from an experienced debt collection agency with access to legal expertise. This agency can then guide you through the somewhat complex legal process, and advocate on your behalf.

 

Below, we outline the various legal options available to businesses for debt collection.

 

A Formal Letter of Demand

A letter of demand is the final warning before legal proceedings commence. When this letter is sent using a debt collectors’ or solicitors’ letterhead, it can be enough to prompt your debtor to settle payment before any court documents are filed.

Another effective method of finalising outstanding payments is to register the debt against the debtor’s credit rating. Professional debt collectors can do this on your behalf and often, this is enough of an incentive to settle the matter and avoid an expensive court proceeding.

Many debt collection agencies now offer a no collection, no commission fee structure, meaning you are only required to pay for the debt collectors services when you receive the outstanding payment from your customer.

 

Filing a Statutory Demand

A Statutory Demand is a formal written request for payment of debts owed by a company. This is issued pursuant to Part 5.4 of the Corporations Act 2001 (Cwlth) (‘Act’).

The intention of this legislation is to prevent companies from trading whilst insolvent, and incurring further debts which will not be repaid.

A company who is served with a Creditor’s Statutory Demand has a period of 21 days to pay the amount demanded, or to bring an application in the Supreme Court to have the Creditor’s Statutory Demand set aside.

The 21-day period must be strictly complied with and cannot be extended even by a Court.

Before a Statutory Demand can be served, there are specific requirements that must be fulfilled. You should seek professional advice before taking action.

 

Court Proceedings

If none of the above has resulted in payment, then you can undertake court proceedings. This is a much more complex and formal process, and should be considered a last resort once all other action has failed.

You will need the help of a solicitor to file court proceedings and it is advisable to hire one that specialises in debt recovery. If you work with a debt collection agency with in-house solicitors, you can be confident that all of your pre-court steps have been legally exhausted, and you can fast track the filing of your court papers with minimum stress, hassle and cost.

Depending on how you have written the terms and conditions of your contract agreements, you may also be able to recover part or all of the legal costs by passing this liability onto your non-paying customer.

At Marshall Freeman, we are more often than not able to settle your debts before you even have to think about filing court documents. Using industry leading technology and proven collection techniques, our recovery process provides a very professional and ethical approach to collecting your outstanding payments whilst preserving customer relationships at the same time.

 

If you have outstanding payments that need to be recovered quickly, please get in touch for a FREE appraisal of your debt today!