Debt collection services

If the debt is not recovered after friendly reminders, informal negotiations and a letter of demand, you might decide to engage a debt collection service. This is a business that tries to recover the money for you for a fee. Using a debt collection service goes one step further than sending a letter of demand because it signals to the hirer that you have decided to hand the matter over to professionals. This could further strain your business relationship with the hirer, however sometimes it may be more important to get the money you are owed.

Traditional debt recovery methods

Traditionally, a debt collection service will send a 'letter of demand' to the debtor on its letterhead, demanding that the debt is paid by a particular date or legal action may be taken. If necessary, the service will issue a second, 'final' letter of demand or follow up with a 'phone demand'. If unsuccessful, you can engage the service to take legal action on your behalf. The fee you will pay is referred to as a commission. Most commission rates for debt collection services vary  between 5 and 30 per cent of the value of the debt.

Debt purchasing or debt buying

In some cases, you can sell the debt to a debt collection service for a small percentage of the debt amount. The service will then pursue the debtor to recover part or all of the money owed but you will not be entitled to any of the money if recovered. You may wish to consider this option when you have written off a debt.

Online debt recovery

Some debt collection services or lawyers provide online debt recovery services. Usually, these services require you to type in the information about the debt you want to recover (such as the hirer's business name, address, amount of debt, what the debt was for). The service then generates a letter of demand for a fee that you pay online. The letter is usually sent to the hirer for you.


  • It's fast and easy.
  • It's relatively cheap (often a fixed fee paid by credit card online).
  • The letter is usually on the letterhead of a lawyer or debt collection service so it may have more of an impact than an ordinary letter.


  • You have little control over what is written.
  • You probably won't get advice as part of the service.
  • There are the usual dangers of using internet services, such as fraud and insecure payments.
  • It could damage your future business relationship with the hirer.  

Example: engaging a debt collection service on an annual basis

Simon is an independent contractor who provides computer services to small businesses. After losing $7,000 in one year from several unpaid bills from customers, he decided to engage a debt collection service on an ongoing basis. He paid an annual fee of $2,000 for this service. On all his contracts, quotations and invoices, Simon included terms and conditions of payment provided by the service. They state that any costs associated with recovering the debt will be charged to the hirer.

In some cases, if a bill is not paid on time, Simon asks the debt collection agency to chase the payment. They do this until the debt is paid and the agency's costs are recovered. Simon doesn't use the agency for all his unpaid bills because sometimes he wants to maintain the business relationship so he can get more work from that hirer in the future. He uses negotiation, first and second reminder letters and, if necessary, mediation to come to an arrangement with valuable hirers that he knows are worth the effort.

Simon sees the annual fee as a form of insurance and a way to reduce worry and stress about money.

Security of payments in the building and construction industry

Independent contractors in the building and construction industry can get help to recover payments from a hirer under state and territory security of payment laws. These laws usually provide a dispute resolution mechanism for building and construction contractors who are owed progress payments for work performed for a hirer.

You can use the security of payments law regardless of whether your contract is verbal or written. You will be covered by the law of the state or territory in which the work is done. In most states and territories, security of payment laws allow you to issue the hirer with a payment claim, which gives the hirer a strict timeframe in which to respond with either payment or a payment schedule. If the hirer does not respond, you may be able to take your dispute to adjudication, where the hirer may be forced to pay immediately. Security of payment laws are different in each state and territory. You should check to see how the laws operate where you do your work.

Small business commissioners and ombudsman

Small business commissioners and ombudsman are generally government appointed advocates who represent the interests of small business. A small business owner in New South Wales, Victoria, South Australia and Western Australia who has a dispute with another business or organisation may apply to the small business commissioner in their state for advice, advocacy and low-cost or subsidised mediation.  

State small business commissioners

Small business commissioners can investigate complaints about unfair market practices affecting small business. They also provide low-cost or subsidised alternative dispute resolution (ADR) services for small businesses, that aim to mediate disputes. Most offices deal with disputes about retail leases. The Victorian Small Business Commissioner also deals with owner–driver, forestry contractor, farm debt and general business/commercial disputes.

Most state small business commissioners are recent appointments, so keep in touch with your state office for the latest information about their services.

Australian Small Business and Family Enterprise Ombudsman

The Australian Small Business and Family Enterprises Ombudsman provides information and assistance to small businesses and family businesses, including referral to dispute resolution services. It advocates and represents small and family business interests and concerns to the Australian Government and works with industry and government to promote a consistent and coordinated approach to small and family business matters.

What to do next

Understand who controls the hirer's business

Make sure you are dealing with the right person when trying to resolve a dispute. Do a general web search for the hirer's name or use these services to get the hirer's business name and company details:

Get advice

  • Consult your business adviser, industry association, union or lawyer.
  • To find a lawyer, contact the Law Society or the Law Institute in your state or territory. For contact details, check your local telephone directory.
  • Unions can represent independent contractors and help with disputes. To find out which union covers you, call Unions Australia on 1300 4 UNION or visit their website.
  • Visit a business enterprise centre.

Find a private mediator, conciliator or arbitrator

  • Contact one of the recognised mediator accreditation bodies listed on the Mediator Standards Board website. These organisations can provide you with the names of accredited mediators.
  • Look under 'mediation', 'conciliation' or 'arbitration' in your local business telephone directory for both individual practitioners and organisations that can coordinate the details of your dispute resolution process for you.

Find an expert

  • Contact one of the recognised mediator accreditation bodies listed on the Mediator Standards Board website. These organisations can provide you with the names of accredited mediators with specialist qualifications.

Find a free or low-cost mediation service

Many state and territory governments or non–profit organisations offer free or low-cost mediation services to independent contractors. This includes small business commissioners in some states.

Get help with a franchising dispute

Find a mediator who is acceptable to both participants. If you cannot agree on a mediator, contact the Office of the Franchising Mediation Adviser by calling 1800 150 667 (toll-free within Australia) or (02) 9267 0167. You can also email the office, or visit the Office of the Franchising Mediation Adviser website.

Learn more about ADR

Find a debt collection service

  • Look under 'debt collection services' in your local business directory or do a web search for 'debt collect'.
  • Find an online debt collection service or lawyer by doing a general web search for 'online debt collect'.

Find out about security of payment in the building and construction industry

  • Contact your industry association or the government building authority in your state or territory.
  • Unions can provide advice about security of payments. To find out which union covers you, call Unions Australia on 1300 4 UNION.

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