Debt Recov­ery is not one of the most pleas­ant tasks for a busi­ness to have to under­take. Unfor­tu­nate­ly, chas­ing bad debts is some­thing that hap­pens far too often and can be crip­pling to a busi­ness if left unat­tend­ed.

There are some real­ly sim­ple mea­sures that you can take to avoid cost­ly mis­takes when it comes to debt recov­ery. And, if you do find your­self hav­ing to recov­er a debt, there are a few options avail­able to you.

What is Debt Recovery?

Debt recov­ery is the process of pur­su­ing pay­ments of debts owed by indi­vid­u­als or busi­ness­es.

Most busi­ness­es usu­al­ly recov­er mon­ey owed by late pay­ers through tele­phone calls, reminder state­ments and spe­cif­ic col­lec­tion let­ters that request pay­ment. If these process­es do not result in pay­ment by the debtor, you will need to con­sid­er your fur­ther debt recov­ery options.

Debt Recov­ery Options

  1. Write a let­ter of demand to the debtor if pay­ment is not made.
  2. If debtor does not pay, com­mence pro­ceed­ings Resolve the mat­ter by using alter­na­tive in the rel­e­vant Court or Tri­bunal.
  3. Issue a Statu­to­ry Demand if the debtor request­ing pay­ment and stat­ing your inten­tions is a cor­po­ra­tion
  4. Resolve the mat­ter by using alter­na­tive dis­pute res­o­lu­tion such as medi­a­tion or arbi­tra­tion.

Three Com­mon Mis­takes to Avoid

  1. Not fol­low­ing a dis­pute res­o­lu­tion pro­ce­dure in a con­tract. If there is a con­tract gov­ern­ing the rela­tion­ship between you and the debtor, and this con­tract con­tains a pro­ce­dure for resolv­ing dis­putes, you must con­sid­er and fol­low the require­ments of this clause. Pro­ceed­ing to lit­i­ga­tion with­out fol­low­ing a dis­pute res­o­lu­tion clause could result in delay and may be cost­ly.
  2.  Com­menc­ing pro­ceed­ings with­out thor­ough consideration.If you com­mence pro­ceed­ing with­out giv­ing prop­er atten­tion to mat­ters such as the mer­its of your claim, any pos­si­ble defences or cross claims the oth­er par­ty may have, and issues such as the cor­rect par­ty to sue may increase the cost of lit­i­gat­ing your mat­ter.
  3. Fail­ing to con­sid­er how you will enforce a judg­ment or assum­ing it will be easy. If you obtain a judg­ment and the debtor does not pay, there are process­es for enforc­ing your judg­ment, how­ev­er this can be a tedious, time con­sum­ing and cost­ly process. The assets and finan­cial posi­tion of the debtor to pay a judg­ment should be con­sid­ered before pro­ceed­ings are com­menced.

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