top of page
  • Writer's pictureArida Lawyers

Best Practices for Debt Recovery and Risk Mitigation

Updated: May 18, 2023

Navigating the predicament of having provided services or delivered goods without receiving due payment can be considerably challenging and potentially disruptive. In the delicate balance of debtor-creditor relations, every communication and subsequent action holds immense significance. Nevertheless, it is crucial to recognise that not all debt recovery methods are equal.

Even though you may have a rightful claim to the funds and a legal entitlement to the money owed, the approach you adopt to collect your debt must adhere to the applicable law, regulations and code of conduct. Notably, a creditor is prohibited from employing physical force, coercion, harassment, deceit, exploitation, or unconscionable conduct during engagements with a debtor to recover a debt.

Implementing proactive measures to mitigate debt risks

Employing certain best practices can serve to minimise the likelihood of bad debts. Recommended preventive strategies include:

  • Implementing thorough due diligence and conducting background checks when feasible.

  • Avoiding business interactions with entities currently in administration or liquidation.

  • Prioritising credit ratings and reputation assessment before transacting.

  • Ensuring receipt of payment before dispatching goods or executing services.

  • Prompt issuance of invoices and seamless facilitation of the payment process.

  • Encouraging early payment.

Among these practices, ensuring the strength and validity of your contract and/or terms and conditions is critical, providing protective measures in case of non-payment. For example, preserving explicit clarity in the contract about the payment deadline and non-payment implications can significantly aid your cause. Also, post-transaction, establishing regular payment reminders and meticulously maintaining a record of all correspondences can prove beneficial.

Nevertheless, it is important to note that every transaction inherently carries a degree of risk. This risk is particularly amplified in online transactions, where the exchange of goods or services and payment do not occur simultaneously.

Despite all precautionary measures, you may end up dealing with an individual or company that defaults on their payment obligations. Their original intent—to pay or not—becomes moot when you are left without your rightful remuneration.

Addressing non-payment by an individual or company

In instances where debt recovery efforts leave you feeling powerless, it becomes imperative to evaluate your options. Consider the significance of the amount owed, the potential legal costs, and whether pursuing the matter aligns with your principles.

Engaging a team of legal professionals skilled in debt recovery can provide an array of legal services to assist in your efforts to recover the outstanding debt. These services may include personalised advice tailored to your circumstances or, if necessary, court representation.

Court proceedings are not always a necessary route. Often, debts can be recovered via a 'letter of demand'—a legally composed letter addressed to the debtor, usually the company's director. When well-crafted, this letter often serves as a powerful motivator for the debtor to discharge the debt.

Should payment remain unresolved, the letter can lay the groundwork for further action, potentially leading to court proceedings seeking a judgment against the debtor. Even in the event of court proceedings failing to result in payment, experienced lawyers can often resort to other enforcement action, such as a Writs, Garnishee Orders and Insolvency proceedings.

To initiate your journey towards recovering your owed funds, contact Arida Lawyers on 1300 146 390 or

This article provides general information relevant to our expert services. It is not legal advice and should not be relied upon as such. If you are seeking legal advice, you should contact us for a free initial consultation.

Liability limited by a scheme approved under Professional Standards Legislation.

42 views0 comments


bottom of page