Internal Debt Collection Tips for Clients

Debt Collection in Australia

When you are contacing your clients to chase overdue accounts then you are engaging in debt collection activity and you have to be aware of an abide by the national guidelines.

In Australia, debt collection is regulated by the Australian Securities and Investments Commission (ASIC) and the Australian Competition and Consumer Commission (ACCC). These regulatory bodies have established guidelines to ensure that debt collection practices are fair and transparent. Here are some key guidelines to be aware of:

1. Fair Debt Collection Practices: Debt collectors must act fairly, reasonably, and without harassment or coercion. They should not use deceptive or misleading tactics to recover debts. This includes not making false statements or threats, misrepresenting their authority, or contacting debtors at unreasonable hours.

2. Privacy and Confidentiality: Debt collectors must comply with privacy laws and protect the personal information of the debtor. They should only disclose information to the debtor or their authorized representatives.

3. Contacting Debtors: Debt collectors should make reasonable attempts to contact debtors and provide sufficient information regarding the debt. They should not contact debtors at unreasonable hours, such as early mornings, late nights, or on public holidays.

4. Dispute Resolution: Debt collectors must have a process in place to handle disputes and complaints. If a debtor disputes the existence, amount, or validity of the debt, the debt collector should investigate the matter and provide appropriate evidence or documentation.

5. Financial Hardship: Debt collectors should be aware of a debtor’s financial hardship and must provide assistance when appropriate. They should consider alternative payment arrangements or refer debtors to relevant support services if necessary.

It’s important to note that these guidelines are not exhaustive, and there may be additional rules and regulations depending on the specific circumstances and jurisdiction. If you’re facing debt collection issues, it’s recommended to seek legal advice or contact organisations like the ACCC or ASIC for further assistance.

Do you have a rigid internal debt collection process?

It is important to implement a process and stick to it in every case you manage with regard to your own internal debt collection. You might think one case is worth letting slip through the cracks.

DON’T DO IT! That is the case that will return to bite you in the back side.

Always be confident and honest in your internal debt collection communication with customers. However, be mindful of your tone and ego when communicating with these customers. Effective and positive communication is not only important when dealing with difficult customers. It deepens relationships, gets you to your goals, and increases productivity and cash flow.

It is also important to use an external debt collection agency and debt collection solicitor to help support you with those cases that drag on and become too difficult. When in doubt you should refer the matter as soon as possible to your external debt collection support network.

It is incredible how an external voice can suddenly achieve results that you have not been able to achieve internally. The fact is – certain organisations do not pay bills until a debt collection agent starts calling them. It is part of their internal accounts payable cash flow procedure.

Your internal debt collection efforts should be focused on accounts between 0 and 90 days. Do not leave it too late to refer a debt for professional collection assistance. A good rule of thumb is once a debt is 90 days overdue then you should not be wasting your time with it anymore. Focusing internally on your 0–90 day debts will ensure that a fewer number of those debts ever reach 90 days overdue, which in return results in fewer debts being referred externally.

Historical data shows that once debt gets passed 90 days overdue then the chances of recovery drop to 50%. You should not waste your time on these matters. Get the experts in.

Australian debt recovery figures, days overdue to chances of recovery are provided below:

• 60 Days – 75% recovery rate
• 90 days – 50% recovery rate
• 180 days – 35% recovery rate
• 365 days – 20% recovery rate

NSW Credit Law’s debt recovery figures easily outperform the market. We are not about to give away the secrets that make our service offering so successful but we can share a few communication tips for our clients to implement internally:

12 Debt Collection Communication Tips for Clients

1. Staying motivated and working hard will always bring you closer to meeting and exceeding your internal collection targets.

2. Ask yourself – what is going to keep your customer from breaking their payment promises with you over breaking them with somebody else?

3. It is important to prioritize the quality of your conversations with your customers and not just the quantity of conversations you are having. Stay positive, avoid arguments and judgment.

4. How you speak to your customer is going to affect whether you are going to have a broken payment in three months when times get tough. Having customers that consistently make their payments will be more effective than one-time payments from customers that eventually stop responding to you.

5. Focus your approach on a serving/helping mindset rather than a payment collections mindset. Adopting that mindset will help you increase the amount you collect while decreasing the number of complaints you receive from customers. When customers feel let down, undervalued or offended, they will be less likely to make a payment.

6. Active listening combined with acknowledging and putting in the effort to understand the customers position will work towards tearing down any negative pre-conceived notions they may have regarding debt recovery conversations.

7. Transforming a customer’s negative attitude towards debt collection into a positive one will help break down any barriers that could prevent a successful resolution.

8. Internally it is important to show some empathy towards your customers that are struggling financially. Consider your customers’ needs in order to reach your collection goals consistently.

9. Stay positive – having a positive and can-do attitude is infectious. When you focus on staying positive, you will see your customer’s demeanour change. This will help in facilitating effective conversations from both your and the customer’s perspective.

10. Effective and positive communication is not only important when dealing with customers. It deepens relationships and increases productivity all aspects of business.

11. Communicate with confidence and honesty. Be knowledgeable on all of the payment options available to the customer and convey those to them in a confident manner.

12. Honesty builds trust, and that is a key step for having more successful debt recovery conversations with customers.

13. Focus internally on 0-90 days. Do not waste time internally on debts passed 90 days overdue. Refer them to an external debt collection agent/solicitor to ensure you get the best recovery rate on those debts.

NSW Credit Law 2022 – this article is general in nature and should not be considered legal advice. Please contact Paul Thorndike of NSW Credit Law to discuss advice specific to your own business or situation.

Disclaimer: When researching and drafting this article we may use an AI advanced language model amongst other sources. It is intended for general informational purposes and should not be used as a substitute for professional advice. While every effort has been made to ensure the accuracy and reliability of the information provided, we cannot guarantee its completeness, timeliness, or appropriateness for any particular purpose. Usage of this information is at the reader’s own risk. We are not liable for any errors, omissions, or results that may be obtained from the use of this information. Always consult with a qualified professional before making any decisions based on the content of this article. For legal advice please contact Paul Thorndike on 0429 008 247 or at paulthorndike@nswcreditlaw.com.au