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Debt recovery glossary

Debt recovery has a vocabulary of its own. This plain-English glossary explains the terms you are most likely to come across — whether you are recovering an account or responding to one.

These definitions are written in plain language for general understanding. They are not legal or financial advice — for guidance on a specific account or situation, contact us or speak with a qualified adviser.

Accounts receivable: The total amount owed to a business by its customers for goods or services already delivered but not yet paid for. Also called trade receivables or simply receivables.
ACCC & ASIC debt collection guideline: The joint guideline published by the Australian Competition and Consumer Commission and the Australian Securities and Investments Commission that sets the standard for how debt collection must be conducted in Australia.
Ageing report: A report that groups outstanding invoices by how overdue they are — for example current, 1–30 days, 31–60 days, and beyond. It is the clearest single picture of what a business is owed and for how long.
AFCA: The Australian Financial Complaints Authority — a free, independent dispute resolution scheme for complaints about financial products and services, including some debts connected to them.
Commission: A fee charged as a percentage of the amount successfully recovered. A commission model ties the recovery firm's fee to the result it delivers for the client.
Creditor: The party to whom money is owed. In a recovery matter, the original creditor is the business that supplied the goods or services and is owed payment.
Debtor: The party who owes money. In commercial recovery the debtor is usually another business, though a debt may also be guaranteed by an individual.
Debt purchase: An arrangement in which a recovery firm buys a portfolio of outstanding accounts outright from a creditor, for an agreed price, and then owns and pursues those accounts itself.
Dispute: A genuine objection to a debt — that it is not owed, the amount is wrong, or it is not recognised. When a genuine dispute is raised, recovery activity is generally paused while the matter is reviewed.
Financial counsellor: A qualified professional who provides free, independent and confidential advice to people experiencing financial difficulty. In Australia the National Debt Helpline (1800 007 007) is staffed by financial counsellors.
Financial hardship: A situation in which paying a debt in the way it is currently due would leave a person unable to meet reasonable, necessary living expenses. Hardship may be temporary or longer-term.
Hardship arrangement: A payment arrangement adjusted to take a person's genuine financial difficulty into account, so that repayments remain sustainable alongside essential living costs.
Letter of demand: A formal, written request for payment of an outstanding amount. It is a standard step in commercial collections and normally precedes any escalation to legal recovery.
Limitation period: The window of time within which legal proceedings to recover a debt can generally be commenced. For a simple contract debt this is commonly six years in Australia, though it varies by state and circumstance.
Mercantile agent: A traditional term for a person or firm engaged in debt collection and related commercial recovery work.
Payment arrangement: An agreement to pay an outstanding amount over time, in instalments, rather than in a single payment. Also called a payment plan.
Personal guarantee: A promise, usually given by a company director or owner, to personally meet a company's debt if the company does not. It can extend who a debt may be recovered from.
Pre-legal recovery: The stage of recovery that takes place before any court action — structured contact, letters of demand and negotiation. Most accounts resolve at this stage.
Receivables management: The ongoing process of managing what a business is owed — from issuing invoices and reminders through to following up overdue accounts — with the aim of keeping the receivables ledger healthy.
Recovery costs: The costs of pursuing an overdue debt. These can sometimes be passed on to the debtor, but only where the contract or terms of trade clearly provide for it.
Reference number: A unique number assigned to an account in recovery. Quoting it in any contact ensures correspondence and payments are matched to the correct account.
Retention of title: A clause in terms of trade stating that goods remain the supplier's property until they are paid for in full. It can affect what a creditor may recover if a customer does not pay.
Terms of trade: The agreed rules of doing business with a supplier — payment timeframes, late-payment consequences, dispute handling and more. Clear, signed terms are the foundation of a straightforward recovery.
Assignment of debt: The transfer of ownership of a debt from one party to another. When a debt is assigned, the new owner steps into the shoes of the original creditor and can pursue recovery in their own right.
Bankruptcy: A legal process applying to individuals who cannot pay their debts, administered by the Australian Financial Security Authority. It is distinct from corporate insolvency, which applies to companies.
Caveat emptor: Latin for "let the buyer beware." A legal principle meaning the buyer is responsible for checking the quality and condition of a purchase before completing a transaction.
Credit application: A form completed by a customer before credit is extended to them. A well-drafted credit application captures legal entity details, director information, trade references and signed acknowledgement of terms of trade.
Credit limit: The maximum amount of credit a supplier is willing to extend to a customer at any one time. Managing credit limits is a key part of keeping receivables healthy.
Days Sales Outstanding (DSO): A measure of how long, on average, a business takes to collect payment after a sale. A rising DSO indicates the receivables ledger is ageing, which increases recovery difficulty and cash-flow pressure.
Default listing: A record added to a credit reporting body indicating that a debt has been overdue for a defined period. Defaults can affect a debtor's credit file. They can only be listed where the rules under the Privacy Act have been followed.
Garnishee order: A court order requiring a third party — typically a bank or employer — to pay money owed to a debtor directly to the creditor. It is one mechanism for enforcing a court judgment.
Insolvency: The state of being unable to pay debts as and when they fall due. A company may enter voluntary administration, liquidation or receivership; an individual may enter bankruptcy. The type of insolvency affects what recovery options remain.
Judgment debt: A debt formally recognised by a court judgment. A judgment creditor has access to enforcement mechanisms — such as a garnishee order or a writ of execution — that are not available before judgment.
Proof of debt: A formal claim lodged by a creditor with a liquidator or trustee in bankruptcy, setting out the amount owed. Filing a proof of debt is a prerequisite for receiving a dividend in a winding-up.
PPSR: The Personal Property Securities Register — an Australian government register of security interests in personal property. Registering a security interest on the PPSR can be critical for enforcing a retention of title clause.
Skip tracing: The process of locating a debtor whose current contact details are unknown. It may involve searching public records, databases and other available information sources.
Statute barred: A debt that can no longer be pursued through the courts because the limitation period has expired. The debt still exists in principle, but the creditor has lost the right to sue. Certain actions by the debtor can restart the limitation clock.
Voluntary administration: A process in which an insolvent company is placed under the control of an administrator, who investigates its affairs and may propose a Deed of Company Arrangement (DOCA) as an alternative to liquidation.

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