For the nation’s 2.2 million businesses, cashflow is king. It is so important to day-to-day operations, that the Australian Small Business Ombudsman notes inadequate cash flow and business debt accounts for 46.9 per cent of all small business failure.

If your business is doing all the right things but is crippled by delayed payments and business debt, here’s what you need to know and how a lawyer might be able to assist.

The business cashflow conundrum

The University of Technology, Sydney recently issued a report into the prime reasons Australian businesses fail, and three of them were attributed directly to cashflow.

Of the 12 reasons identified, they noted the following cashflow practices all contributed to closure:

• Bad costing and delayed invoicing;

• Giving too much credit, resulting in bad business debt and slow payment

• Poor cash control and pilfering of goods/cash/profit

On the flipside, good cashflow management can allow you to build your business more quickly, equips you with greater borrowing power and allows you to maintain your staff base and operation should times get tough.

The art of good cashflow

In truth, managing business cashflow isn’t so much an art, but the accumulation of good habits.

These include:

• Regular accounting, including timely invoicing – Many businesses outsource their accounting or if they’re large, have an accounting team in-house. But for sole operators, accounting is often the last job on the business agenda. Try to make accounting a priority and keep your accounts up to date.

• Cashflow forecast – A cashflow forecast indicates what cash will be required and what incoming payments are expected over the coming month and year. This allows you to plan for the peaks and troughs of the business cycle.

• A clear Payment Policy – Your payment policy and terms of trade outline the time in which payments are required, what will happen should a payment fail to be made and the internal procedures that are implemented to retrieve a payment.

This is an area where a lawyer can assist. At T&T Lawyers, we can help you review your contracts, terms of trade, and trade agreements to ensure they’re crystal clear.

When all else fails

In 2015, the Sydney Morning Herald noted Australian businesses were owed about $26 billion at any given time because of unpaid invoices and an estimated 60 per cent of that was bad debt.

If your business sits among these statistics, a lawyer can help to reclaim the debt you are rightfully owed.

At T&T, our lawyers can assist at any stage of the recovery process, employing the following strategies:

A letter of demand
A letter of demand is sent to the debtor indicating you require payment by a specific date. This debt collection letter needs to be legally admissible and must include specific details of the debt, a request that payment be made by a certain date, and a warning that debt recovery options will be pursued if payment is not received.

Suing for debt
Should a debtor fail to make a payment by the date outlined in the letter of demand, you can then commence court proceedings by filing a Statement of Claim. The Court handling the matter depends on the amount of the debt and the forms required vary. Therefore, it is important to seek legal advice at this stage.

Debtor response
The way that the debtor responds to the Statement of Claim determines the next steps. They may agree to an instalment order, they may not respond at all in which case a court judgment will be obtained, or they may file a Defence.

About T & T Lawyers

T & T Lawyers is a dynamic and progressive Sydney-based firm offering sound advice, effective strategies and the best possible outcomes in all areas of law including business debt recovery.

We can help you at any stage of the debt recovery process, whether that’s helping you write an effective and legally sound letter of demand, or pursuing the matter through the Court system.

Our debt lawyers are familiar with the process of enforcing Judgment and can manage the process right through to bankruptcy or company winding up proceedings if need be.

You can learn more about our services here, or contact us directly for further advice.