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Knowledge & Insight

SMALL BUSINESS OWNER - SHOULD I DO MY OWN DEBT COLLECTION?

Yes, of course, after all it’s you that’s not being paid for the product or service you delivered. However, doing this by yourself is going to take you away from your actual business, unless you have experienced staff to help. And I say experienced for a reason, there are a number of rules and guidelines governing debt collection, and you will be very limited in what you can do yourself. Besides, a fair few of business owners aren’t comfortable with the confrontation that comes with asking customers for money and some business owners prefer to keep at arm’s length when it comes to debt collection and their customers. Keep these 5 guidelines in mind if you do decide to collect yourself:

1. The State your business is in.

In each of the States in Australia, there are different rules around the licencing requirements when it comes to chasing people or businesses for outstanding debt. Some states allow phone collection only without a licence, but some require full licence for any type of debt collection you do i.e. phone based, face to face, letters

2. ACCC Rules and Guidelines to Debt Collection.

There are very strict rules in place for debt collection activities for example you can’t call or message a debtor / customer more than a specific amount of times within a week and a month. There are limitations as to when you’re allowed to call, the type of day and the time of day. There are also restrictions on the wording you use in letters or sms communication, even as simple as using the word “will” over the word “may” or “can”, can get you in to some hot water with the regulators.

3. Systems and Technology.

Do you have the systems in place in your business to aid you in debt collection, not just systems that generate invoices? You need to keep record of the attempted contacts with your customers in order to proof you’re not harassing them and voice recordings in order to settle a dispute of what was said. Do you have a proper collection flow that you can use within your systems to ensure you are effectively using collection tools i.e. phone, sms, email, mailed letter, site visits?

4. The Extra Cost of Debt Collection.

When you are doing your own debt collections, there are extra costs involved in the form of time spend or phone calls. You are not able to charge this extra cost onto the initial outstanding invoice as you won’t be able to reasonably show what you incurred. However, if your Terms & Conditions are written correctly, you are able to charge the cost of using an external debt collection agent (commission charges) on to your customer.

5. Privacy Rules.

You are not allowed to talk about outstanding debt to a next of kin or partner of your customer or divulge information about their account with anyone other than the customer. Therefore, be very careful when you contact a next of kin in order to get hold of the customer.

All in all it’s easy to make a few phone calls to a customer owing you money. However, be wise and realise when you’re better off contacting a professional, licenced debt collection agency to assist you. Contra to popular believe, certain debt collection agencies will help you get paid without destroying your relationship with the customer and your (or their) reputation.

For more tips and information or if you require help to get paid, contact me directly below or via Marlé Ambrose website.
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