How to prevent unpaid debt

Before you enter into an agreement with other businesses, ask the right questions and do some research. Knowing that a business is legitimate and solvent will make you more confident in dealing with them.

Find out as much information about the business, operations and finances as you can:

• Check their Australian Business Number (ABN) details on ABN Lookup to make sure the business is legitimate and still operating.
• Check the Australian Securities & Investments Commission (ASIC) registers to confirm that the information they gave you is true. You can report a business to ASIC if you think they’re acting illegally.
• Stay up-to-date on business related scams via the Scamwatch website.

Put any agreements in writing so everyone can refer to it if there’s a dispute. Always seek legal advice before creating or signing a contract. There may be important information that you don’t fully understand. For example, there could be costly early termination fees.

Make sure you set up a good invoicing system. This is an important part of collecting money. Ensure your invoices look professional and are easy to understand.

Make invoicing a regular part of your business activity. This will not only help with your cash-flow, but you'll be able to keep track of your clients more easily.

Research each payment method that you offer other businesses and your customers. It's important to choose payment methods that meet the needs of your business finances, as well as your customers.

Set up payment terms and policies that will help you get paid on time. Make sure everyone is clear about your payment timeframes and expectations.

An important part of running your business successfully is understanding the laws that apply to debt protection.

Make sure you're up-to-date with laws on:

• consumer protection
• privacy
• fair trading

Seek advice from a solicitor or business adviser if needed.