Preventing unpaid debt

Trying to recover debt from customers or other businesses can be stressful and time consuming. You can reduce the risk of having unpaid invoices or bills by doing some homework before you start work.

Here are some suggestions that can help you prevent unpaid debt.

Know who you're dealing with

Before you enter into an agreement with other businesses, ask the right questions and do some research.

Find out as much information about their business, operations and finances as you can. Knowing that the business is legitimate and solvent may increase your confidence in dealing with them.

  • Check the Australian Business Number (ABN) details of other businesses that you deal with to make sure they’re a legitimate and still in operation.
  • Check the ASIC registers to confirm that the information you’ve been given 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.

Have a signed contract

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, as there may be important information that you don’t fully understand. An example of this can be costly early termination fees.

Create a good invoicing system

Having a good invoicing system plays an important role in collecting money.

  • Ensure your invoices look professional and are easy to understand. For ideas, read our tips and advice on how to create an invoice.
  • Research each payment method that you offer other businesses and your customers when paying for your goods and services. It's important to choose payment methods that meet the needs of your business finances, as well as your customer.
  • Set payment terms and have payment policies in place to help ensure that you receive payment on time. Make sure everyone is clear about timeframes and expectations for payment or read our setting payment terms topic.
  • 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 a track of your clients more easily.

Understand your rights

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:

Seek advice from a solicitor or business adviser if needed.

More useful resources

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