The Facts behind Debt Collection Processes
Any business in the Business Legal Lifecycle will inevitably be faced with the situation where a supplier or contractor to the business is pursuing them for payment of a tax invoice. The business has either not paid the supplier or contractor for cash flow reasons or for the more common reason – the invoice is disputed.
Having a debt collection process as part of a business is imperative to itssurvival. Successful businesses also have procedures in place to deal with the situation where they are being pursued by a supplier or contractor.
The key to dealing with the situation is communication and documentation. If the invoice is disputed the reasons for the dispute must be put in writing to the creditor. Telephone calls are fine however we recommend that any telephone is followed up with an email confirming the details of the conversation.
We recently spoke to a client regarding a well utilised document in the debt recovery process – a creditor’s statutory demand for payment of a debt (statutory demand). The client had received a statutory demand from a creditor and had disputed the invoices received. In the past the creditor had contacted them by telephone a few times to discuss the invoices. Unfortunately due to illness to the business owner and a very busy business the statutory demand was not responded to within the timeframe (strictly 21 days from the date of service).
The effect of not responding within the 21 day time period meant the client was forced into making payment for the invoices as the costs and lost time to oppose any Court action was prohibitive. Had the client documented all the details of the dispute with the creditor and had a process to deal with statutory demands the outcome in our experience would have been vastly different.
Communication and responding to invoices where disputed becomes particularly important within the building and construction industry. The process to deal with payment claims/invoices under the Building and Construction Industry Payments Act is a must for any business in the industry to avoid unfavourable decisions. The timeframes are strict and cannot be extended.
One of our clients was facing some cash flow issues and had an outstanding debt to a supplier. Our client had a process in place which included written communication to the creditor. The creditor appreciated the communication and due to the transparency of our client the creditor agreed to a generous payment schedule.
If you have recently received a statutory demand or you would like to know more about how we can help introduce the process into your business to deal with outstanding debts, contact our office’s dispute resolution expert Craig Mason by email firstname.lastname@example.org or (07) 3667 8966.