What is debt collection
Debt collection is a process initiated when customers fail to settle their unpaid bills within the stipulated due date. This process involves the retrieval of outstanding amounts by either the original seller or a designated debt collection agency.
Differentiating self-collection and debt collection agencies
Self-collection occurs when companies manage the debt recovery process internally. This method mirrors the workings of a debt collection agency but typically involves lower interest rates and fewer payment incentives. On the other hand, opting for a debt collection agency allows companies to delegate the collection process, saving valuable time in recouping outstanding funds.
Tips to prevent debt collection claims
Receiving a debt collection claim is an undesirable situation that can be avoided with strategic measures. Firstly, maintaining a comprehensive financial overview and adhering to a diligent bill payment routine is crucial. This includes keeping track of expenses and promptly settling invoices to prevent them from reaching the debt collection stage. Secondly, ensuring optimal liquidity for the company is paramount. Quick receipt of payments for goods and services, coupled with a well-structured budget, safeguards against unforeseen expenses.
Individuals are also urged to adopt similar financial discipline. Keeping a tight grip on impending bills, maintaining a buffer account, and planning purchases within one’s means can help prevent the initiation of a debt collection case. Similar to companies, individuals failing to resolve a debt collection claim may incur a payment remark, affecting their creditworthiness and potential access to credit and loans.
The law regulating debt collection in Australia is primarily governed by the Australian Consumer Law (ACL), which is enforced by the Australian Competition and Consumer Commission (ACCC). An unpaid invoice does not go straight to debt collection. You can receive reminder fees and debt collection notices before it reaches the point where you receive a debt collection claim.