If you run a business in Melbourne right now, you’ve probably noticed it’s getting tougher to chase up outstanding payments. With insolvencies jumping over 60% in Victoria last year (the highest in the country), unpaid invoices are becoming all too common — especially in construction, retail and hospitality.
Our own Michael Scherini and guest litigator Rodrigo Haddad recently sat down to chat about the ins & outs of debt recovery, and their message was clear: when someone won’t pay you what you’re owed, you have several distinct legal options.
The first port of call is usually a letter of demand. Sure, you could fire one off yourself, but when it includes a lawyer’s letterhead people tend to take you seriously and engage. It’s not about coming in all guns blazing — a smart letter spells out the risks of not paying and can often nudge a debtor into settling or agreeing to a payment plan. More often than not
If that doesn’t cut it, things can be turned up a notch. For companies, a statutory demand (for debts over $4,000) is a serious wake-up call — they’ve got 21 days to pay or risk being wound up. For individuals, a bankruptcy notice (for debts over $10,000) is even heavier: nobody wants their name black-marked for years or their house on the line.
Scherini and Haddad were quick to point out that debt recovery isn’t about being a bulldog — it’s about playing it smart. Every case is different, and you’ve got to weigh up the dollars and sense. Sometimes it’s better to cut your losses than throw good money after bad. Other times, pushing ahead makes perfect business sense.
Bottom line? Don’t sit on your hands. If someone owes you money, deal with it early. Whether it’s going to a resolution process, writing a letter of demand, formulating a payment plan, or taking things further with statutory or bankruptcy proceedings, the sooner you act, the more chance you’ve got of actually seeing your cash.
In today’s tough economic climate, waiting around for a dodgy debtor to “do the right thing” could leave you high and dry.
This article is not legal advice, and the views and comments are of a general nature only and not tailored to your personal circumstances. This article is not to be relied upon as a substitute for detailed legal advice. You should consider seeking independent legal advice before making any decision or taking any steps. Legal advice will assist you in understanding how the information contained within this article relates to your personal circumstances and how it may impact you. The content of this article is only relevant as of the date of the article and may be subject to changes in, or interpretation of, the law. Contact Scherini Lawyers today for a consultation.