The Gold Coast is renowned for its diverse range of small businesses operating in a huge variety of industries, from clothing labels, to photographers, to electricians, to tradies. Often being a small business owner provides you with the freedom to be your own boss and pursue your passion, making a profit along the way. However, being your own boss also has its pitfalls, like for instance when a customer refuses to pay an invoice.
As a small business owner you don’t have a regular pay cheque to fall back on when a customer doesn’t pay, you need that income in order to continue operating the business. So what are your legal options when it comes to recovering payment of unpaid invoices?
Small Business and Debt Recovery:
When it comes to debt recovery there are several options available to you as a small business owner, and different industries will also have different options available. The following are just a few general steps you can take to force a customer to pay their invoice:
- You can engage a lawyer to make a formal demand for payment of the invoice to the debtor on your behalf; or
- Where it is a company debtor you are chasing, you can serve a statutory demand under the Corporations Act 2001 (Cth) for payment of the debt, as a precursor to liquidation proceedings; or
- You can initiate court proceedings against the debtor.
Choosing the right option will of course depend upon the circumstances, the debtor and the industry you operation in. When engaging in any form of debt recovery it’s a good first step to get advice from a business lawyer who can provide you with more information on each option and point you in the right direction.
Negotiating with Debtors for Payment:
You of course don’t have to initiate any formal process in order to seek payment of an invoice. Sometimes the right way to go about debt collection is to approach the debtor and try to negotiate, this way they are more likely to do business with you again and not feel as threatened. A formal legal process is no guarantee of payment either, so consider if the debtor may be willing to negotiate payment of the invoice.
Examples of Negotiating with a Debtor:
- Entering into a formal repayment agreement with them, allowing for the debtor to pay the invoice in small, regular payments that are more affordable to them; or
- Taking a security in exchange for extra time to pay the invoice; or
- Agreeing to reduce the amount payable in exchange for the immediate payment of the lesser amount.
In negotiating you need to be careful of protecting your business and its interests.
There is of course always to option to engage a debt collection agent to chase the client for payment of the monies owing to you.
As you can see there are several different avenues you can take when it comes to debt collection as a small business owner. It’s a good idea to have an initial conversation with a business lawyer as to which avenue is the most appropriate for your business and will provide you with the best result.