DEBT COLLECTION TIPS DURING COVID–19
The current health directives enacted by the Federal Government have resulted in many areas of business seeing significant decreases in revenue. To avoid a mass influx of corporate liquidations and personal bankruptcies, the federal government enacted the Coronavirus Economic Response Package Omnibus Bill 2020. The bill reflects the following major changes;
- The minimum threshold for a creditor to issue both Statutory Demands and a Bankruptcy Notice has been increased from $2,000.00 and $5,000.00 respectively to $20,000.00;
- An increase in the timeframe for which a debtor company or individual has to respond to a Statutory Demand or Bankruptcy Notice from 21 days to 6 months; and
- Temporary relief from directors liability for insolvent trading.
The above changes will remain in effect until 25 September 2020.
In order to minimise your business’ exposure to incurring unpaid debts during this period, there are a few simple steps that can be taken to sure up your internal debt collection process. These processes include;
- Formalise your agreements with clear terms and conditions including clear payment terms, charging clauses and personal guarantees for corporate clientele;
- Where possible, request deposits prior to providing your goods and/or services; and
- Perform ‘financial health checks’ on potential clientele to aid in determining whether the individual or corporation is still solvent.
The above reflect some simple but effective processes which will aid your business in avoiding bad debts. Should you require any further advice in relation to the above, contact the team at Miller Sockhill Lawyers.
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