The building industry sucks right now!

Getting paid has never been harder and not getting paid could ruin you soon-right?

So let’s talk about debt collection and stuff you should know and practice…and it’s a blog worth reading to the end.

What is the role of a solicitor in a Client Collect Debt?

What process happens?

What are the various options and how should the client adequately brief and instruct the solicitor?

OK Let’s begin with the STARTING POINT –The Terms and Conditions

DON’T JUST TAKE THE BUILDERS CONTRACT -SERVE UP ONE OF YOUR OWN

“No one’s paying” -well that’s what it feels like.

‘Terms and Conditions’ is a phrase that gets thrown around on the daily, and is most likely just the box you tick to speed up your booking process on the internet, without even reading what they actually are. But in this case, the Terms and Conditions with a client or customer is the document that dictates your relationship and sets your solicitor and client boundaries. The Terms and Conditions should oversee the following crucial items:

  1. Payment Terms –7/14/21/30 days agreement
  2. Interest rate for late payment
  3. Charging clause
  4. Money up front
  5. Reasonable costs of recovery
  6. PPSR clause –registration over assets if hiring out assets
  7. Specifics to your business

IF YOU GET THESE IN PLACE WE ARE ON THE WAY TO BUILDING A SYSTEM THAT WILL AT LEAST BEGIN TO HELP YOU.

Now that your terms and conditions have been presented, you must ensure that you create your ‘Photographic History’. Photograph every aspect of every job you do and store it in time sequence.

Technology is forever evolving, and it can be quite resourceful.

Alongside this, you must guarantee that you have all agreements in writing.

But what happens if your customer doesn’t pay you?

First – You pick up the phone. Give your client a call and decipher whether there is a problem, as most of the time having a professional and friendly conversation can clear up any issues.

  1. It is crucial that you have written confirmation of your discussion. Send an email summarising this discussion to your debtor.
  2. Watch what you say and write down what you will say before the conversation. Remember you want to minimise back lash from off the record conversations in the future. And yes those who are canny at avoiding payment will record your conversation. On the other hand consider recording the conversation yourself, especially useful if you received a commitment to pay, and it doesn’t happen in the future.

If this process continues to fail, you can turn to sending a letter of demand and setting a due date for payment.

If these methods haven’t worked for you, it’s time to go to the lawyer.

And the longer you leave this, the less chance you will have at getting paid. If the debt is already over 90 days, you are starting to face considerable difficulties. If you are still on the job 90 days after not getting paid -you are an idiot.

In using a lawyer, you need to have a set of objectives and have the lawyer take instruction from you. Once you have handed over to a lawyer stay out of the way. Let them negotiate. If you get called by your debtor, refer it back to your lawyer.

To guarantee ample preparation for your lawyer, you must be able to provide them with the your invoices and Statement of Account, contact details of the debtor and the correspondence leading up to seeking the lawyer which includes any allegations of negligence and/or counter claims.

Following on from contacting the lawyer, there are now three options which they can pursue; Creditors Statutory Demand, Magistrates Court/ County Court/ Supreme Court or VCAT.

Generally we will recommend a client ask a lawyer to send a letter, that will say that cost of recovery will be pursued, and after 7 days and absolutely only 7 days a statutory demand is sent.

Hopefully settling with the debtor is the next step.

The terms of settlement and the Deed of Settlement will be prepared and signed by all parties, which will provide full releases, especially if counterclaims arise. At this stage, no excessive interest should be calculated to the debtor for late payment and a late payment fee should not be overly excessive. However, many debtors are switched on and know the “tricks of the trade”, so it is imperative that you and your lawyer take all the just steps in collecting your debt.

And we hope that doing this ends well for you. You must decide if further action is required. Is your debtor in financial trouble and all you are now doing is paying legal fees? At least you will have a sense of things.

We will in another blog cover in more detail Security of Payments and how to check out your client first.