Articles
Debt Recovery - a guide for creditors
Bad debts are the bane of every business. Quite apart from the hassle and annoyance involved,
a really big bad debt problem can have a serious detrimental impact not only on cash flow but also on overall liquidity. You do not need to consult a lawyer to find out that bad debts are bad business. If you cannot avoid having bad debts then the next best thing is to collect them.
Effective debt recovery does not have to be expensive. In fact, debt collection is a relatively simple and straight forward process. In our experience there are two key elements to watch for when trying to implement a successful debt management strategy, viz:
- every business requires a well designed, streamlined system. For a large business this means having a system that can cope with a high volume case load.
- no system no matter how well designed will work properly for you unless you also harness the services of an experienced debt recovery practitioner, i.e. someone who knows how to make the system work for you. In this way some common pitfalls can be avoided.
Some cases need more specialised care and attention than others. Not all debt recovery cases are the same. It is important to be able to recognise as early as possible the signs which tend to indicate trouble ahead.
Where a debtor fails to pay and the size of the debt warrants it, you may have to issue proceedings through the District Court. Most debt recovery cases proceed to judgment without opposition and for these it is essential to ensure that the best enforcement measures are adopted in each case. In this way recovery can be maximised at the least cost. The skill is in making the correct choice. Why accept an instalment arrangement over an extended period of time if the better option is to persuade the debtor to pay up in full immediately. Sometimes an instalment option will be preferable and sometimes bankruptcy procedures will be more effective.
A relatively small percentage of debt recovery actions are defended and here again it is essential to have the right person on your side. When a debtor gets difficult you need a practitioner well versed in the Rules of Court. You need someone who knows what tactics are likely to be employed by professional debtors and their advisors. An experienced debt recovery practitioner should know how to successfully combat delaying tactics in order to ensure that your case is dealt with in the shortest time possible and that prospects for a successful outcome are optimised. For advice on the options available to you and/or your business please contact Kimberley Morris-Lissette on (04) 479 8269 or by email.