We’ve covered what to do to get those pesky late invoices paid before – and that advice is well and good if you’re actually receiving a response from your customers – but what about the ones that refuse to pay, or worse: never return your phone calls?
This is the last-resort process: please start with the gentle approach when debt collecting!
Debtor: this is the person that owes you money.
Creditor: this is you/your business.
1. Weigh it up
If this is a serious debt, you may be better off contacting your solicitor to proceed on your behalf. In this post we’re specifically discussing smaller amounts (i.e. $10,000 or under) as this is most common overdue amount among small business owners.
If you fall into the ‘small amount’ category: read on!
2. Write a demand letter
This is not as hard as it sounds, especially if you have all those notes you took when you took the gentle approach. Make sure you keep it factual, and include:
- Name, address and contact details of the debtor
- Specifics of the debt/s: include invoice dates, numbers, amounts and any part payments made.
- Details of how you’ve attempted to contact the debtor, and responses received. (You don’t need to detail every single point of contact, but keep that information handy. It’s enough to say something along the lines of “We have attempted to contact you multiple times via phone, email and mail but have heard no response.”)
- Details of how you would like to be paid
- The date you would like to be paid by
- What will happen if payment is not made.
Make sure you include all your contact details as well. Send a copy of this letter to the debtor via registered post, as well as through any other means you think necessary: email, fax, etc.
Patience! Now that you’ve given your debtor a specific date that payment is due, you just need to wait it out until close of business on that day. If you’re lucky you may not have to go any further with it — you might get contact or even a quiet deposit into your bank account. If so: congratulations!
If not: don’t worry just yet!
4. Lodge it with the small claims court
Each state has it’s own small claims court (or similar dispute process). Below are the links for each state (where possible I’ve linked to the appropriate page):
Contact the Small Claims Court (or similar) in your state and lodge a claim. Even if partial payment has been made, you can still lodge a claim for the outstanding amount.
5. Follow through with the small claims court
The small claims court process will vary from state to state, be sure to ask your local government for the process when you lodge your initial claim.
It may feel like nothing is happening, but at this stage it’s up to the court to process the claim. In the majority of cases, the debt is quickly resolved.
6. What happens if I still haven’t been paid?
If the small claims court ruled in your favour but you have still not been paid, don’t stress. You still have options! If you follow up with the Small Claims Court you can take action to enforce the payment of the debt.
The process will vary from state to state, ask your local government for the process when you lodge your enforcement of judgement request.
By the end of this step you should have certainty on what is going to happen. Either the debtor will have paid you in full, or have a payment plan enforced which ensures you will see your money! The repayments may be as little as $20 per week, but I think most of us would prefer to see some money over a long period of time rather than none at all!
Are you a member of the MEAA?
If you’re a member of the Media Arts and Entertainment Alliance, remember that they have a Debt Recovery Service which you can use to help get these pesky payments sorted out.
We hope this post has given you a firm direction for you to go ahead and start chasing those debts! This advice is of a general nature only and should not be relied on. For detailed advice regarding your exact situation, contact your accountant or solicitor.