Debt Recovery for Retailers

Did you know that as a retailer, you must have a purchase order in place even if you wish to collect goods that have been sold but not paid for and that only 20% of court orders ever result in full payment?

The world of credit management can be complex and even with the best credit management processes in place, some level of bad debt is inevitable. One of the most important things you can do for your business to move fast, avoid going to court and always select the most appropriate method for your business.

In my experience, it always makes good business sense to have good processes in place to encourage punctual payments. These include:

1) Offering discounts. Even a discount of as little as 2% can encourage people to pay on time.
2) Reminder Letters. These should contain a short message to gently remind the customer that payment is past due.
3) Payment Interest. This should be calculated from the day after payment was due until the day payment is made.
4) Credit Checks. These can be costly so only use these when you are entering into a long term relationship or one with the impact to really affect your bottom line.

If all else fails, the next stage is to actively pursue the debt through the courts.

There are two main stages to this:
1) Obtain a judgment order
This is simply a court order that directs a person to pay a debt. It does not guarantee payment of the debt to the creditor and it is simply recognition of the debit.
2) Enforcing judgment
There are various means that the creditor can rely on to recover his/her money.
If it is a liquidated sum (a specific sum of money) the first step is to send a letter of demand. You can find a sample at newagelegalsolutions.com.au website. In my experience, this is sometimes all that it takes to get the creditor to pay up!

However, if the money remains unpaid, the next step is to issue and serve a ‘Statement of Liquidated Claim’. Following this, If the defendant admits liability and offers to pay the outstanding debit, there will still be an agreement to pay either the whole amount of the debt or a lesser sum negotiated.

However, If the defendant fails to defend a liquidated claim, the creditor can now sign judgment (legal recognition of the debt), after 28 days from the date of service of Statement of Liquidated Claim. If the defendant defends the liquidated claim within 28 days (from the date of service of the Statement of
Liquidated Claim) the matter will be heard by the appropriate court and on the balance of probabilities judgment will be granted to the plaintiff or the matter will be dismissed.

Even though at this point you may have a court order, the next step is actually receiving your money!

If the debtor refuses to pay the creditor has several options:
• Examination summons
• Writ of execution against goods or land 
• Installment orders – debtors agree or are ordered to make regular payments according to capacity to pay. Interest charged on outstanding sum. This is the preferred option to recover a debt because the debtor has agreed.
• Bankruptcy and liquidation 
• Liquidation (only if a company) (more in the next article about winding up a company or if a company is are served with a letter of demand)

With over 20 years’ legal and business experience, Katherine Hawes is the
founder and principle solicitor of New Age Legal Solutions which offers fixed
prices legal solutions for businesses. To find out more about her work and how
she can help your business with debt recovery please see www.newagelegalsolutions.com.au

For our Debt Recovery course for businesses, click here.

Click here to download a FREE sample of a Letter of Demand.

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