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CommercialMay 29, 2017

How Your Lawyer Can Help Your Cash Flow

Hearing the words lawyer, help and cash flow in the same sentence may seem odd to some. The reality though (and it doesn’t matter what business you are in), your credit controller and your litigation lawyer should be “besties”. Why? Because a good litigation lawyer knows that having a close business relationship with its client’s credit controllers results in them being better educated about the Court system, and this in turn produces a better understanding about the process, and more importantly, results in better outcomes for the client and their business.

As with the lyrics of Kenny Rogers famous song “The Gambler”, so it is with debt collection:

“You’ve got to know when to hold ’em,
Know when to fold ’em,
Know when to walk away,
And know when to run”

Educating your Credit Control team

It may seem obvious, but when a business is owed money the last thing its managing director wants to do is to spend more money on legal fees trying to collect what is already due and owing to the business.

Add to this the possibility of an inexperienced litigation lawyer, frustrations of the court system, usual delays, and sometimes cunning debtors, and you could end up with tears all round.

What do smart businesses do? They educate their credit controllers about the Court system, the various different traps that may lurk, the various different delays that may occur, and the different defence strategies that lawyers will adopt to minimise costs.

Smart lawyers on the other hand recognise this need from the outset, and then develop short cuts for their clients to adopt in the day to day running of their business in order to keep the costs down and make snappy decisions about how to deal with each matter depending on the facts of each matter.

Some Illustrations

Did you know that you may be able to issue a Statutory Demand on a company where the debt owing by that debtor company to you exceeds $2,000.00 in circumstances where the debt is not disputed?

Did you also know that if the debt is not paid in full within 21 days then you can take action to have that company wound up?

Moreover, if the company ignores the Statutory Demand it doesn’t matter how good their defence might be, they will either have to broker a deal with you, or pay you what they own you in full if they want to prevent you from winding up their company.

The entire process is therefore reversed from the usual debt collection method.

This is highly useful for a credit controller to know because it is a game changer. No long delays, no time wasting, and no big legal fees.

What if before there was any talk of lawyers, your credit controller already knew this?  What if your credit controller had already sent an email to the debtor company which effectively eliminated the possibility of the debtor company  later claiming the debt is in dispute.

Considering the above, it is easy to see why you should educate your credit team and train them to identify particular categories of debt in order to make the collection as simple as possible.

Another simple illustration: Does your credit team know they should make contemporaneous notes of conversations they have with debtors? One day they might have to give evidence about what was said during such conversations, and your case is significantly stronger if you have a detailed record of what was said by each party at the time the conversation took place. If you put yourself in the shoes of a judicial officer, you can see how compelling this is.

The benefits of working together

Working together with your credit controllers and your lawyer can lead to a streamlined method of receiving instructions, and of sending initial letters of demand in such a way that it is cost effective and worthwhile for both you and your lawyer.

Developing and agreeing on cost effective strategies when dealing with “small” debts (and what amounts to small is different to different people) avoids lengthy and expensive discussions. Both “need to know”, just as the song suggests.

Working together also means that your lawyer becomes familiar with your terms of trade and other credit control policies you may have in place, and they may be able to suggest refinements or improvements to help you and your business in the future.

Want to know more?

We provide cost effective debt recovery services and in certain situations, you can also recover your legal costs related to recovery proceedings.

If you need to know more about how our debt collection practices might help or if you want to know more please contact us on (08) 9335 9877 or complete the form below to request an introductory consultation.


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