An overdue account raises two practical questions with real consequences for what you can recover. The first is how much you can claim — the original amount, or more. The second is how long the account stays recoverable at all. Both have clear general answers and important limits.
Can you charge interest on a late payment?
Often, yes — but only where there's a basis for it. The two usual sources are a clause in a written contract or terms of trade that provides for interest on overdue amounts, and, in some circumstances, a statutory entitlement. The key word is basis. Interest applied without one is open to challenge, and an overstated claim weakens the whole recovery. If your terms provide for it, say so clearly and apply the agreed rate; if they're silent, the safer course is to take advice before adding it.
Can you recover the cost of collection?
Sometimes. The cost of recovering a debt can be passed on to the debtor only where the agreement between the parties clearly provides for it. A well-drafted set of terms of trade will say so explicitly; an informal arrangement will not. This is one of the quiet advantages of having proper terms in place before an account goes bad — it is what makes recovery costs claimable rather than merely wished for.
Why accuracy protects you
It's tempting to load every possible charge onto an overdue account. In practice the opposite recovers more. A claim where every figure is correct and supportable is hard to dispute and holds up if the matter is escalated; a claim padded with charges that can't be substantiated invites exactly the dispute you want to avoid. The amount to pursue is the amount that can properly be claimed — no more, and no less.
Limitation periods — how long you have to act
A debt does not stay recoverable forever. A limitation period is the window within which legal proceedings to recover a debt can generally be commenced. For a simple contract debt this is commonly six years in most Australian states, but the detail varies by state and by the type of debt, and certain events can affect when the clock starts or restarts. Once the period expires, your legal options narrow sharply.
Why timing is the real lesson
The practical takeaway from both halves of this guide is the same: act sooner. Recovery rates fall as accounts age, and the legal options narrow as the limitation clock runs down. An account comfortably within time, with accurate figures and clean documentation, has the full range of options open to it. An account approaching the end of its limitation period, with charges that can't be substantiated, has very few. Waiting rarely improves an outcome.
This guide is general information, not legal or financial advice. Limitation law and the rules on interest and costs vary by state and by circumstance — obtain advice specific to your situation before acting on it.