If you work in a small or medium sized business, there is a strong chance you have heard this unwritten rule before: a sale is not a sale until the money is in the bank. It is estimated that it usually takes Australian small businesses between 30 and 60 days to get paid, with the average around 50 days.
But what do you do if collecting your unpaid bills stretches well past this date?
We have put together a simple step by step guide of what you can do and what each step involves.
Step 1 – Letter of Demand
If you have an unpaid debt and you’ve sent friendly reminders and attempted to get in contact, without the desired result, you can begin drafting a letter of demand.
A letter of demand is a formal record that you have begun the debt collection process. It may not seem all that different to phone calls or emails, but a formal letter of demand can be used as proof that the required steps have been undertaken if the debt collection process goes further.
A letter of demand should contain, at a minimum:
- A formal restatement of the amount outstanding and the date
- A timeline of when the bill was originally due and actions you have taken to date to recover it
- A clear and defined time period that you require payment to be made by
- A statement of the steps you will pursue if the bill is not settled, which may include legal action
However, you must also ensure that your letter of demand does not include any of the following:
- Threats that are not permitted by law, such as withdrawing services without the require notice or saying that previously delivered good will be picked up without their consent
- Harassing language of any kind
- Documents or designs that are designed to make the letter look like an official court document
You must wait 21 days before you take other action, to allow the debtor time to respond to your letter of demand.
Step 2 – The Response
In response to your letter of demand, you should be prepared for a range of options. The best case scenario is that your letter of demand is complied with in full, and all your debts are settled.
The debtor may also respond with what they believe is proof that there is no money owed, by producing records of bank transfers. It is also common to have debtors respond to formal letters of demand with terms of compromise, like revised time frames or payment instalments.
Of course, you may also receive no response at all.
Step 3 – Your Reaction
If the debt remains unpaid, and there is no indication that it will be, your options include writing off the debt or pursuing alternative arrangement, including engaging an experienced and professional debt collector, like our team here at Challenge Collections.
If you would like to learn more about a how we can streamline the process, and help you recover your unpaid debts, we invite you to call us now on [phone].