Chasing debt in the land of Oz

November 25, 2013 8:05 PM

I run a small business. I have a couple of clients who won't pay their bills. What's the best move?

I've been running a small solar power business in regional Victoria for 20 years but have never really had a problem with bad payers (lucky, I know) until recently, when we bought an electrical business. I have a couple of customers now who owe significant sums ($750, $1450) and am trying to work out if there is a better way than taking them to VCAT or setting a debt collection agency onto them.

We've sent letters of demand, which, like most other communication - monthly statements, phone calls - have been ignored. We would be happy to accept them paying it off, but neither of these people want to talk about it. They just keep putting us off.

We're not nasty people. We don't want to make them suffer or embarrass them or destroy their credit rating. We'd just like to get paid if possible. I would love to hear of innovative ways to deal with this. If there isn't a better alternative, I wonder if anyone can recommend a debt collector?

posted by mewsic to Work & Money (11 answers total)

I don't know, but from the other end if I'd paid for services and failed to receive them, I'd be contacting my local department of fair trading/consumer affairs. You could contact them, and they should know who the right agency is to talk to.
posted by singingfish at 8:38 PM on November 25, 2013

Best answer: I'm not in your jurisdiction, but I have a creditor's rights law practice. As you have found out, demand letters go in the trash. There are not a whole lot of "innovative" ways to get paid when your client/customer refuses to pay. You can sue them or write a letter. Suing is better.

I looked up the VCAT system and it seems ideal. Why don't you want to avail yourself of it? I get that you aren't "nasty" and you don't want to make people suffer. Well, you want to get paid for your work. That isn't being nasty. You are not making anyone suffer when you demand payment for your work. To the contrary, they are making you suffer by making you work for free. They will never, ever pay you if you don't sue them.

I think you should use the VCAT process. You have legal rights. Exercise them and get paid. Don't let the word get out that clients can get you to work for free and all they'll have to endure is a polite letter or two.

This is all just information, of course, and not legal advice.
posted by Tanizaki at 8:42 PM on November 25, 2013 [5 favorites]

small claims procedures are exactly what small cases like this are designed for. Should be open and shut. If they still don't pay, you have the satisfaciton of ruining their credit rating. And that's quite a reasonable thing to want to do if people don't pay you for your work.
posted by singingfish at 8:45 PM on November 25, 2013 [1 favorite]

Best answer: Unfortunately in my experience with small debt collection, if people aren't responding to letters of demand with offers to at least make arrangements to pay, then they're not going to pay unless you make the consequences of non-payment more difficult for them than finding the money.

I presume they are not current customers, and you can't threaten to cut off supply.

I would send a final letter of demand setting out very concretely the steps you will be taking and in what time frames (for example, within 7 days if no payment, report outstanding debt to credit reporting agency such as Veda, commence proceedings for debt in VCAT, please note you will be personally served with these proceedings and so on). Then follow through. As Tanizaki said, VCAT is designed for this sort of situation. You're owed money and you should be paid.
posted by fever-trees at 8:47 PM on November 25, 2013

$750, $1450 aren't really significant sums and your debtors know this.

VCAT will take ages and use up your time. You won't be able to sue because a solicitor will cost you more than the debt - if they take you on. They will charge you $500 to tell you to forget it.

Work out the hours it will take to follow up these bad debts and you will find that it soon becomes apparent that it's an unprofitable use of your time. There is a level of debt that small business just can't afford to recoup. You're not Telstra or Westpac, you don't have the resources to follow up small debts. VCAT is a waste of time.
posted by Mario Speedwagon at 9:02 PM on November 25, 2013

Best answer: Yeah, you pretty much gotta go VCAT, nothing else will work and solicitor will be too expensive. It will take a while, you have a good chance of getting your money back I understand (lived and worked in Victoria, once had to investigate all this as I was getting stiffed on a payment).

I personally think it would be worth pursuing on a dollars-per-hour basis, unless you have lots of other dollars-per-hour that you could be doing instead (i.e don't do it when business is booming and you're saying no to new work, do it when there's a lull).

It will take a while, but most of that time is just you waiting for shit to progress. VCAT will find in your favour. Whether you get the money back at that point is dependent on a lot of other factors (are the people ripping you off dirt poor, transient renters, or do they own their own homes, assets, have money in the bank just to name a few).

Personally, I'm the kind of dogmatic prick that wouldn't take it lying down. But from a strictly utilitarian perspective it's probably not helpful.

I would probably forget about a debt collector - for amounts like this it will almost certainly cost you most of what you're trying to recoup, and additionally people who don't pay a lot of bills are generally quite familiar with them, and thus the collectors don't really put the fear in them like they would you or I.

Best of luck,
posted by smoke at 9:19 PM on November 25, 2013

Look at it from this standpoint: if you don't report it to the credit bureau(s), these people will do the same to others. If you're not going to get paid, at least don't let it happen to others.
posted by brownrd at 9:24 PM on November 25, 2013 [6 favorites]

In the States, we have mechanic's liens, in some jurisdictions. It establishes a claim against the property and encumbers it to complicate transfers (sale), loans, credit ratings, etc. and while not getting paid, is getting in line to get paid if/when they want to move on at some point or need credit. because you work on their property, you have a claim against it. not sure about how it works in Oz.

two things i have learned the hard way here are to make sure that the client is aware that they are responsible for legal and collection costs in the event they are needed and interest. has to be substantial. you can use prompt-payment discounts to good effect if they are substantial.

also in collection efforts, you can settle for less if paid by a certain date, find out why they are not paying and try to accommodate them, take progress payments. also, outstanding balance means no service if they have problems. if you suspect you are going to have problems, getting pre-payment is wise.

i do projects, and usually, if large, arrange deposits with order, bill against milestones, moderate my risk, and tolerate the occasional flake.

commerce has many pains. if you look back on the lives of many famous people, they were often deadbeats about paying their bills. a lot of this happens. it's wise to plan for it, and in fact, any financial income statement picked at random from any large US corporation will have it as the second line item.... 1) revenue 2) allowance for bad debt and returns .....etc. before gross income.

big pain. the challenge is getting good customers.
posted by FauxScot at 1:22 AM on November 26, 2013

Bookkeeper's trick: buy one of these. I could send five invoices to some people and they ignore them all until the moment it has a giant red stamp on it.

I don't think that will help in this particular situation (VCAT!) but it may help other situations from getting this far.
posted by magnetsphere at 6:40 AM on November 26, 2013 [1 favorite]

We're not nasty people. We don't want to make them suffer or embarrass them or destroy their credit rating.

Getting paid for services isn't nasty. The consequences for failure to pay properly rendred services are dings on one's credit report.

It would be different if you had a dialog going, and a payment plan in place, etc. But these deadbeats won't even TALK to you! These aren't the kind of customers you want.

Don't be an asshole, but do everything within the law to get the money you are owed.

Pressing people for their debts isn't nasty. It's what is necessary when you own a business.

Clearly the debtors aren't worried about embarassment or poor credit, and to my mind, by refusing to even address the debt, they're being nasty to YOU!
posted by Ruthless Bunny at 8:58 AM on November 26, 2013

Response by poster: Thanks everyone - great answers here as usual.

Tanizaki: I've hesitated to use VCAT because it seems to have become a bit like Restraining Orders - a really good facility that is massively overused and overrun by vexatious people who should be solving their problems some other way. That's no reason not to use it if it's the best tool for the job though. Just means we have to wait a lot longer.

Like smoke, I am tempted to go to whatever lengths with one of them - the lesser amount - because they've treated us very shabbily and tried to get out of paying by lying to us - the one time I got them on the phone - about faults in the work we did, so I've already spent time chasing that up to find out what really happened. I will let it go if I have to though; I don't want to spend any more time than necessary on arseholes.

Thanks again!
posted by mewsic at 10:42 PM on November 26, 2013