Take care of the pennies, and the pounds will take care of themselves

A few reasons why you should be proactive in debt collection; and why you should use professionals to do it, especially if you are a local government.

Most businesses operate some form of credit facility. For some, it is as simple as the payment terms in your invoices – you have done the work and installed the equipment, but you do not get paid until the invoice is settled. For other businesses, it can be as sophisticated as rolling credit limits.

For others it can be an agreement for payment in instalments – dragging out the receipt of funds over an extended period.

All businesses know the importance of cashflow. Keeping the money flowing is critical to every business’ survival – but almost every business has problems with getting debtors to pay their debts.

Directors of businesses have a legal duty to ensure that every company is solvent and is operated for the benefit of the company as a whole. Both duties imply an obligation to ensure that accounts are settled in a timely manner.

Councils have similar duties. Councillors are essentially trustees of Council assets and therefore stand in a fiduciary relationship to their ratepayers. Councils have a duty to ensure the community gets the best possible value from their assets.[1]

This includes a duty to ensure that monies properly owed to Council are recovered in an expeditious and efficient manner, and to put the funds to proper use.

A failure to collect revenues due to a company or a council can be seen as a breach of the fiduciary duty that directors and councillors are under. It deprives the company or council of necessary funds, and shifts the burden of payment of the funds necessary to operate onto the good, paying clients or ratepayers[2].

Some businesses and councils choose to manage the collection of money in-house, however there are at least three good reasons why outsourcing your collections activities makes sense:

1. Specialisation
2. Efficiency
3. Expertise

Specialisation

Unless you are a huge organisation with massive numbers of debtors you are going to only have a handful of delinquent accounts at any given time. Developing systems and resources to deal with those numbers is wasteful and not necessary. CS Legal’s debt recovery team handles hundreds of debt recovery matters every month and has sophisticated processes in place to handle each and every one.

That means we handle the irate debtors, we handle the letters of demand, we handle the phone calls, we handle the Court claims, and we handle the enforcement. And because we handle so many of them – we are not making a trip to Court for one claim, we are not sending out only one letter at a time. When we go to Court we handle several at a time, fractionalising the costs to any one debtor, and any one client.

Efficiency

Because CS Legal has these systems in place, you do not need to employ a specific person to handle these matters, and you do not need to divert your existing staff away from their current duties to handle debt recovery.

Our systems and staff mean that debts are recovered quickly and cheaply, freeing up your staff to focus on their actual job.

In addition, if you are a local government and you use your own staff to pursue rates debts, those costs are unlikely to be recovered. By outsourcing your debt recovery to CS Legal, council not only frees up its staff to work on their core duties, but the costs incurred by our debt collectors is recoverable from the debtors – so the Council should not be out of pocket at all and Council is safeguarding its scarce financial resources.

Expertise

CS Legal uses a team of dedicated debt collectors to pursue your claims, but if those claims become contentious and more complex legal proceedings are required, we have a team of experienced lawyers ready to assist – so you do not need to outsource those issues to another law firm or pay for your current debt collectors to do so.

We can take any disputed claim, whether it be in the Magistrates Court or the Supreme Court, all the way to a successful conclusion.

We know debt, and we want to ensure you get what you are entitled to – every cent wherever possible.

If you want a more efficient way of managing your debtors, and want to recover more of your costs of doing so, feel free to talk to us at CS Legal to see what we can do for you.

[1] See https://www.dlgsc.wa.gov.au/local-government/local-governments/council-elections/the-role-of-a-council-member

[2] It is also an obvious incident of the power to levy rates and collect them that a Council is obliged not only to use the power for proper purposes – but to actually use the power when the need arises.