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Nobody likes to be in a position of chasing up debts.  For small business owners, chasing up debts is a necessary part of life.  Although it's never a pleasant experience, we can suggest a few strategies to make your life easier, and your bank account healthier

1. Get Paid Up Front

In a perfect world, this would be a perfect solution.  The commercial reality is that it's not always possible to ask creditors to pay upfront for services or goods.

2. Communicate and Be Clear About Pricing

Make sure your clients are sure about what is included in the quote.  It's often beneficial to itemise invoices and also have clients sign an agreement that confirms their understanding of the pricing.  Invite your clients to ask questions about the pricing so you're both clear about where you stand.

3. Invoice Promptly

If you don't issue invoices on the spot, make sure they are issued in a timely fashion.  You cannot expect your clients to pay promptly if you don't issue their invoices in a timely manner.

4. Call

If you do need to chase up a debt, sometimes the best option is to call and chat to your clients individually.  An unpaid debt could be due to something as simple as a mistake in the accounts department or unopened mail that has gone astray behind an in-tray!  This can be quickly rectified with a friendly reminder phone call.

5. Letter

If your phone calls aren't achieving the desired outcome it may be time to put something in writing.  Decide the tone of your letter by reference to the amount of time the invoice has been outstanding.  The pressure you apply should increase as the bill enters overdue territory.  For example, if the debt is only a week or two overdue, keep the letter friendly but firm.  If the debt has been outstanding for a number of months, you may need to draft a letter of demand stating that if the debt is not paid, legal action will begin.

6. Call in the Experts

Depending on the size of the debt you may want to contact a debt collector or lawyer.  Calling a lawyer does not necessarily lead to litigation; a lawyer can help with drafting a letter of demand and also advise on the next steps in the process.

7. The No-no's

Chasing a long overdue debt can be very frustrating.  However, there are some tactics you must never use.  It is illegal to use physical force, undue harassment and/or coercion to chase a debt.  Debt collectors should be especially careful dealing with debtors who are specially disadvantaged or vulnerable.

8. Who Are We?

We are a group of Commercial Disputes lawyers who understand the importance of being paid on time and maintaining your client relationships.  Our work revolves around helping our clients' business run smoothly and achieving a commercial resolution to our clients' problems.  Feel free to contact us at www.landers.com.au if we can be of any assistance.

Alex Rosales is a lawyer in the Sydney Commercial Disputes team of Lander & Rogers Lawyers and a Business Chicks member.  The content of this article is for informative purposes only and does not constitute legal advice.  If you would like advice specific to your particular situation, please contact arosales@landers.com.au

Or connect with Alex here