The businesses that refer the fewest overdue accounts to recovery agents are not the ones with the most aggressive collections processes — they are the ones with the strongest prevention habits. None of this requires new software or a large team. It requires consistency.
This checklist is designed to be used before a problem arises, not after. Run through it annually, or whenever you review your credit management process.
Vet before you extend credit
The single highest-return thing you can do is avoid extending credit to customers who won't or can't pay. Before opening a new account:
- Verify the legal entity name and ACN/ABN on the ASIC register.
- Search the PPSR to see what security interests are already registered against the business.
- Obtain and check trade references — actually call them.
- Consider a credit report from a credit reporting bureau.
- For significant accounts, review the entity's ASIC filing history for outstanding ASIC notices, deregistration orders or insolvency appointments.
A five-minute search can avoid a five-figure bad debt. It is almost always worth doing.
Get your terms in writing
Every account that receives credit should have signed, written terms of trade. Check that your terms include:
- Payment due dates (specific, not vague).
- Interest on overdue amounts (rate and basis).
- Recovery costs claimable from the debtor.
- Retention of title clause (for goods suppliers) and PPSR registration.
- Dispute notification period.
- Governing law and jurisdiction.
If your current terms do not cover these points, update them — and have the updated version reviewed by a solicitor. The gap between "we have terms" and "we have enforceable terms" is significant.
Invoice properly
An invoice that is easy to process is paid sooner than one that creates questions. Check each invoice before it is sent:
- Correct legal entity name for the debtor (not just the trading name).
- Invoice number and date.
- Clear description of goods or services supplied.
- Due date stated explicitly ("payment due 14 days from invoice date").
- Your bank account details for EFT.
- A contact name and email for any queries.
Send the invoice the day the work is done or the goods are delivered — not at month end. The payment clock starts when the invoice arrives.
Follow up systematically
A good follow-up process is regular, documented and consistent. At minimum:
- Send a receipt confirmation when an invoice is issued (catches wrong-address bouncebacks immediately).
- Send a polite reminder 1–2 days after the due date for any unpaid invoice.
- Follow up by phone if there is no response within 7 days of the reminder.
- Get a specific payment date commitment — not "soon" or "in due course".
- Document every contact, every response and every promise made.
The documentation habit is important. When an account is eventually referred to a recovery agent, every contact record, every broken promise and every non-response makes the recovery stronger.
Know when to escalate
Set — and apply — a fixed escalation schedule rather than making case-by-case judgements about when to push harder. A typical schedule might look like:
- Day 1 past due: reminder.
- Day 7: firm follow-up, phone call.
- Day 14: second firm reminder, flag for formal demand.
- Day 30: formal letter of demand.
- Day 45: decision to refer or proceed.
The key word is "fixed". A schedule applied to every account tells debtors — through experience — that your process is serious. An inconsistent process tells them the opposite.
The outsourcing decision
In-house follow-up has a natural ceiling. Recognise when an account has reached it:
- The account is 60+ days overdue with no genuine payment.
- The debtor has gone silent after previous contact.
- A payment promise has been broken more than once.
- Your team is spending disproportionate time on the account.
- The relationship has deteriorated to the point where in-house contact is counter-productive.
Referring to a recovery agent at this point is not a failure — it is a resource allocation decision. You pay commission only on what is collected, which means the cost of referring is zero if nothing is recovered. Continuing to chase it yourself has a real cost in time, and recovery rates fall the longer an account ages.
This guide is general information only. It does not constitute legal or financial advice. For advice specific to your situation, consult a qualified professional.