Victorian Debt Collection & Recovery: What Do Businesses Need To Know?

victorian-debt-collection-recovery

Outstanding debt can be stressful and cause significant cashflow issues for your business. If you’re a business operating in victoria it’s important to have a defined and consistent collection process in place for your business and is complying with the Victorian Consumer Affaird and ACCC debt collection guidelines. In this article we’re going to discuss a basic process for the collection of outstanding amounts and highlight some of the major guidelines you’ll need to comply with.

Put a collection process in place

Every business needs a collection process in place to escalate outstanding accounts to ensure you collect any outstanding amounts as quickly as possible. This process should be consistent and repeatable ensuring you collect, record and communicate effectively to ensure you’ve ticked all the required boxes before proceeding with issuing a compliant.

These steps can be used as an escalation process to contact your customers about an outstanding payment from friendly reminder through to letter of demand and bad debt collection.

Business Victoria details the following process for Small business debt collection strategies. In summary the process looks like this:

  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

In order to have the best chance for collecting outstanding amounts you must have a clear and defined terms of trade. This needs to be incorporated in your sales and onboarding process to ensure that your customers have read and agreed to your terms and conditions. Defining your terms of trade allows you to do the following:

  • Define your credit terms
  • Include liability for debt collection fees
  • Detail any requirements for a successful transaction

Ensure your collection process meets Consumer Affairs Victoria practices

Be aware there are regulations for contacting your customers for overdue payments, refer to Consumer Affairs Victoria for a list of the banned practices for debt collection and the ACC Guidelines.

In summary Consumer affairs victoria details the following banned practices – source

  • entering or threatening to enter a private residence without lawful authority
  • using any threat, deception or misrepresentation to obtain consent to enter a private residence
  • refusing to leave a private residence or workplace when asked to do so
  • exposing or threatening to expose a person or a member of that person’s family to ridicule or intimidation
  • using a document that looks like an official document but is not
  • impersonating a government employee or agent
  • attempting or threatening to possess any property to which you are not entitled. For example, when collecting a debt, you must not say you are going to seize a home or other property that you cannot legally take
  • disclosing or threatening to disclose debt information, without the debtor’s consent, to any person who does not have a legitimate interest in the information
  • making a false or misleading representation regarding the nature or extent of a debt, or the consequences of not paying a debt. For example:
    • falsely representing that a debt is a fine or other penalty imposed by law, or that a person has committed an offence
    • threatening to make a false or misleading credit report.
  • contacting a person by a method that they have asked not to be used, unless there is no other means available. For example, you must not contact a debtor at their workplace when they have asked to be contacted only at home, or contact them directly when they have asked that all communications be handled by their lawyer or financial counsellor
  • contacting a person about a debt after they have advised in writing that no further communication should be made about that debt. This applies unless you:
    • contact the debtor through an action issued by a court or the Victorian Civil and Administrative Tribunal (VCAT)
    • are threatening the debtor with court or VCAT action that the creditor intends to take
    • are communicating with the person to comply with a requirement under the National Credit Code. For more information, visit the Credit section of the Australian Securities and Investment Commission’s website.
  • communicating with a person under 18 about a debt, if the person is not the debtor
  • demanding payment of a debt from someone without having a reasonable belief that they are the debtor. For example, demanding payment from every ‘J Smith’ who resides in a suburb in an attempt to collect a debt owed by John Smith
  • communicating with a person in a manner that is unreasonable in its frequency, nature or content. For information on appropriate hours and frequency of contact, visit the Debt collection guideline: for collectors and creditors section of the Australian Competition and Consumer Commission (ACCC) website.

If you have concerns about whether your staff or your business is complying with Victoria Consumuer Affairs or the ACCC then you should contact a victorian debt collection agency such as JMA credit that specialise in providing accredited and complying collection services.

Tips for the having the best chance of recovery

1. Be Prepared for Excuses

As part of your process it helps to be prepared to respond to common excuses which allows you to provide clear and concise responses to each scenario you’re given. This also allows to remain calm in what many business owners describe as a very stressful part of their day to day business.

  • Our company is filing for bankruptcy – You can respond by asking for the Trustee’s name
  • Your cheque is in the mail – You can respond by asking for the transaction details i.e. receipt number, date of posting, bank institution.
  • Our system is down –  You can provide alternative methods for payment and remind debtors of the terms and conditions for which they have previously agreed.
  • We are waiting on client payments – Once again the terms of trade details is a signed agreement between you and the debtor, not their client, which can be used to remind the debtor of the terms they have agreed.
  • I don’t have a copy of the invoice – Send the invoice again while you’re on the phone and confirm that the debtor receives it while remaining on the phone. Document and record each time the invoice has been sent and that the debt has confirmed that the invoice has been received.

2. Keep Clear Records.

Should you ever require wish to issue a complaint it’s very important that you have clear and concise records of the actions and events that have been taking leading to a legal ruling. It’s important to be able to show flexibility and that every attempt has been made prior to lodging a complaint.

For more information and further reading

 

Written by Richard Thompson

Richard Thompson is the Managing Director and owner of JMA Credit Control and has over 25 years’ of trusted experience. Richard has a wealth of knowledge in Credit Management and Debt Recovery ensuring client’s recovery bad debt quickly and cost effectively.

Leave a Reply

Your email address will not be published. Required fields are marked *