Is a late-paying client in Brisbane impacting your ability to pay suppliers, cover wages, or invest in growth? You are not alone.
Data from the Australian Securities and Investments Commission (ASIC) shows that in the 2022-23 financial year, 44% of all entering external administrations had less than $100,000 in liabilities, a strong indicator that cash flow issues, often stemming from unpaid debts, are a primary cause of business failure.
Before a debt threatens your viability, it’s essential to act decisively. This guide outlines the practical steps to recover what you are rightfully owed under Queensland law.
What is a Commercial Debt?
A commercial debt is money owed by one business to another for goods supplied or services rendered. It is distinct from consumer debt (money owed by an individual for personal purposes) and is governed by different laws and courts in Queensland.
Your Step-by-Step Guide to Commercial Debt Recovery
1. Act Immediately and Review Your Records
Don’t wait. The longer a debt remains unpaid, the harder it becomes to recover.
Check the Contract: Review the signed agreement, terms of trade, or purchase order. Confirm the payment due date, any agreed-upon grace periods, and the interest you can charge on late payments.
Gather Documents: Have the invoice, delivery dockets, proof of service completion, and all previous correspondence ready.
2. Send a Formal Letter of Demand
Before incurring legal costs, a formal, written reminder is often the most effective first step. This is not just an email; it’s a serious document that sets the stage for further action.
Be Clear and Professional: State the amount owed, the original due date, and reference the invoice numbers.
Specify a New Deadline: Give a firm but reasonable new deadline for payment (e.g., 7-14 days).
Outline Consequences: Clearly state that if payment is not received by the new deadline, you will commence legal proceedings without further notice.
You may also mention your entitlement to claim interest and recovery costs under your terms of trade or the Civil Proceedings Act 2011 (Qld).
3. Issue a Final Notice (Statutory Demand)
If the Letter of Demand is ignored, you can escalate by issuing a Creditor’s Statutory Demand for Payment of Debt under the Corporations Act 2001 (Cth). This is a powerful tool if the debtor is a company.
Strict Timeline: The company has 21 days to either pay the debt or secure a court order to set aside the demand.
Serious Consequence: Failure to comply allows you to presume the company is insolvent and apply to the court to have it wound up.
Legal Guidance Essential: The process for issuing a statutory demand is strict. Any errors can invalidate it. It is highly recommended you engage a lawyer for this step.
4. Engage a Brisbane Debt Collection Lawyer or Agent
If internal efforts fail, engaging a professional is your next strategic move.
Expertise: A lawyer specialising in commercial debt recovery understands Queensland-specific laws and procedures. They can assess your case, recommend the strongest strategy, and handle all communication.
Leverage: Their involvement alone often prompts payment, as debtors recognise the seriousness of the situation.
Contingency Options: Some firms may act on a “no win, no fee” basis or a percentage of the recovered amount.
5. Commence Legal Proceedings
If the debt remains unpaid, your lawyer will advise on filing a claim in the appropriate Queensland court:
Queensland Civil and Administrative Tribunal (QCAT): For debts up to $25,000 (or up to $100,000 for minor commercial disputes). QCAT is designed to be a faster, less formal, and more cost-effective option.
Magistrates Court: For debts up to $150,000.
District Court: For debts between $150,000 and $750,000.
Supreme Court: For debts over $750,000.
Your lawyer will file a Claim and Statement of Claim, which the debtor must respond to. If they don’t, you can request a default judgment.
6. Enforce the Judgment
Winning in court doesn’t guarantee payment. If the debtor still refuses to pay, you need to enforce the judgment. Your lawyer can help with several methods:
Warrant of Execution: Authorises the court bailiff to seize and sell the debtor’s assets.
Examination Notice: Requires the debtor to provide detailed information about their financial situation and assets.
Garnishee Order: Orders a third party (e.g., the debtor’s bank or a customer who owes them money) to pay the debt directly to you.
Charging Order: Secures the debt against real estate property owned by the debtor.
Key Considerations Before You Start
Cost-Benefit Analysis: Always weigh the total debt amount against the potential legal costs, time, and effort required to recover it.
Debtor Solvency: If the debtor is insolvent or in liquidation, recovery becomes complex and chances of full payment are low. A professional can help you assess this.
Time Limitations: Be aware of the limitation period. In Queensland, you generally have six years from the date the debt became payable to initiate legal action.
Conclusion
Recovering a commercial debt in Brisbane requires a methodical approach. By following these steps—from a formal demand to engaging legal experts—you protect your business’s cash flow and demonstrate that you take your accounts seriously.
Disclaimer: This information is for general guidance only and does not constitute legal advice. You should seek advice from a qualified legal professional experienced in Queensland commercial debt recovery for your specific situation.
