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Steps to take to Collect your Small Business Debts

Small businesses rely on a regular flow of income from the business to keep going. A bad debt could mean the difference between a profit and a loss. For a small business, collecting debts can be difficult as the bargaining power is less.

It is important to seek professional legal advice to protect your business from bad debts. LawPath you can get in touch with a debt collection lawyer who can clarify your rights and determine the best course of action concerning your outstanding debt.

Here are a few things that you can do to collect your debts and increase the chances of getting paid.

Steps to take to collect your small business debts

1. Understand your debtor

Try and understand why the payment is late. You may be dealing with a first time debtor or a person who habitually delays payments. By speaking with the debtor you can understand if it is matter of finances or wilful default. But before doing that, make sure you contact the right person and comply with The National Consumer Credit Protection Act (NCCPA) 2009. This can be remedied by asking for contact details while raising your invoice. Based on the reasons, you can come up with solutions to deal with the debtor.

For more information check out our post on guidelines for debt collectors.

2. Contact the debtor about the debt

Once you have mailed the bill and a reminder to the debtor, contact the debtor and ask him or her if they have received the invoice and try and obtain a verbal agreement to a date by when the person intends to pay the debt.

3. Follow-up

If the debtor has not yet made the payment, contact them again mentioning that the debt is still outstanding. This can be after 15 days to a month. Try obtaining reasons and mention that interest will now be charged for late payment.

4. Set up a payment schedule

You can agree to a payment schedule with the debtor so that you can set up a timeline with a revised schedule for payment. This will help you remind the debtor of the payment and give notice regarding the date on which interest will be payable.

Once you have exhausted all options, you could then resort to more strict measures.

Discontinue all services that the debtor receives

Once payment is not received and enough time and opportunity has been provided to the debtor, discontinue all services that the debtor is receiving. However, before doing this, send them a Warning Letter.

Letter of Demand

A letter of demand will let the debtor know that you intend to start legal proceedings if they do not pay the debt. This letter will contain information regarding the debt which can help provide evidence of your attempt to collect the debt. It is important to get this letter reviewed by a lawyer. Hiring a lawyer to review the letter will ensure that it is drafted correctly and accepted by the Court.

Statutory Demand

If your letter of demand is ignored or refuted, you have an option of taking the debtor to Court. When you are owed more than $2000, a statutory demand can be sent to the debtor outlining the debt and attaching the relevant documentation. What this letter also means is that if the matter proceeds to a Court, then the Court can deem the debtor as insolvent. The consequences of a Statutory Demand are very stringent as this could lead the debtor into liquidation.


While running a business, the last thing you want to do is spend valuable time chasing outstanding debts. Outsourcing the recovery of your debts to a lawyer with expertise in debt collection allows you to focus on other aspects of your business. With Lawpath you have access to highly qualified debt collection lawyers who will assist you with a legal option that is fast, affordable and tailored to your needs.

LawPath has access to highly qualified debt collection lawyers who can help you recovery your small business debts.Contact a LawPath consultant on 1800LAWPATH to learn more about customising legal documents, obtaining a fixed-fee quote from our network of 600+ expert lawyers or to get answers to your legal questions.

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