Debt Collection Agency for Small Business – JMA Credit Control

No matter what kind of business you’re in, there will always be some customers who don’t pay their invoices. You send bills that aren’t paid and make calls that aren’t answered. Or maybe you just hear excuses.  As a small business it’s easy to become overwhelmed and struggle to keep up with the combination of day-to-day operations and continuous follow-up of outstanding accounts.

This post will go into some of the process around small business debt collection and what do depending which scenario you are presented with.

Small business debt collection process

What’s the process?

Business Victoria details the following process for Small business debt collection strategies.

1. Contact with a friendly payment reminder
2. Contact with an overdue payment reminder
3. Contact your customer with a final notice
4. Try to make direct contact with your customer (this can also be done earlier in the process)
5. Send a final letter of demand

If you’ve sent a letter of demand with no success then it might be time to issue a compliant and instigate formal legal proceedings. If the debt has been outstanding for longer than 90 days it’s highly recommended that you at least seek professional assistance in order to have the best chance of the recovery of outstanding money.

We also detail a number of strategies you can put in place to ensure that you get paid on time. Be sure to view our additional blog posts:

• How small business can improve cashflow with these simple steps
• 5 debt collection tips to recover outstanding debts quickly
• The debt collection process

Filing a claim – What are your options?

Small claims procedure – VCAT

In Victoria, small claims are dealt with by the Victorian Civil and Administrative Tribunal (VCAT) and this option is suitable where a dispute exists.

The downside with this option is that you have to lodge your own claim and appear before the tribunal.

Larger claims procedure – Magistrates Court

The aim is always to avoid any form of court action and ensure all prior steps are exhausted before issuing a complaint. In fact before issuing a complaint the Magistrates’ Court outlines that you must attempt to resolve the dispute directly with the other party before proceeding in the courts. In legal terminology a complaint is a legal document that sets out the facts and legal reasons that the filing party (you) believe are sufficient to support a claim against the party (debtor) that in entitles a remedy or damages to be paid.

Note that the Magistrates’ Court of Victoria has jurisdiction to deal with debt recovery claims and damages claims up to the value of $100,000.

Should I hire a Collection Agency for my small business?

If you’re dealing with unpaid debt you’ve most likely thought about debt collection agency for small business and whether it’s the right time to hire one for your business. Will it affect my client relationship or will it damage the reputation of my business are all questions that are often asked.

Small business debt collection agency can often be viewed negatively due to reputations gained through television and media but in reality they can greatly increase the chance or recovering your outstanding amounts. The ACCC also has debt collection guidelines in place which means that debt collectors are expected to operate in a professional manner which means you’re not going to get any “cowboys” using questionable tactics.

There a number of advantages to hiring a collection agency

• They have a proven debt collection process ensuring you the best chance for recovery bad debt
• The often have in-house lawyers that will assist you with legal advice and filing a complaint.
• The can save you time and money by handling the collection on your behalf
• The offer risk free services with no collection no fee price options so you don’t pay unless your money is collected.

It’s important to note that not all collection agencies deal with VCAT claims  so depending on the amount you want to collect will often determine the best path way for your unique scenario.

Should you sue the debtor?

Before you decide to initiate a claim against the debtor you should first decide when it’s the right time to do this, for example:

• Can the debtor pay? If the debtor has a number of creditors seeking outstanding debts and becomes insolvent then it may mean that pursuing legal action is likely to cost you more than anything you’ll receive in return.
• Is your claim strong? You need to ensure that your claim is strong and whether there is significant evidence to support your claims. If your claim is unsuccessful it means the other party will have the opportunity to apply for legal costs against you.
• Can you settle it out of court? Often when you use a debt collection agency you’ll find that your debtor is more responsive and appreciates the seriousness of your claim. If possible it’s always preferable to settle out of court which will be in the favour of both parties. If you take this approach ensure that there is an agreement in place between both parties to avoid a return to the same scenario.
• Are you within the 6 year timeframe? When you start court action there is a time limit for filling a complaint which is generally around 6 years from the start of the date.

Frequently Asked Questions

How does a small business assess whether their unpaid debts are suitable for a collection agency or legal proceedings?

Small businesses should analyse the size of the debt and the debtor’s responsiveness. A debt collection agency for small business specialises in understanding small business needs, providing a focused and tailored recovery strategy without the complexities and costs of legal proceedings.

What are the initial steps a small business should take internally before engaging a debt collection agency or lawyer to handle their unpaid invoices?

Before reaching out to a debt collection agency for small business, it’s vital to document all debtor communications and issue a formal demand letter. This preparation streamlines the collection process, enabling the agency to act more effectively.

Are there specific industries or types of small businesses for which debt collection agencies are more effective than others?

Debt collection agencies for small businesses are particularly adept at serving industries with clear-cut transactions and invoiced services or products. They customise their collection methods to align with the unique business environments and regulatory requirements of these sectors.