Tips on How to Avoid Bad Debt

Tips on How to Avoid Bad Debt

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Hi, my name is Adam Stewart, Debt Collection Expert and owner of Debt Recoveries Australia.

No one wants to be chasing unpaid invoices. But sometimes the people we do business with do not uphold their side of the agreement. Whilst there are steps to recover unpaid debts such as outsourcing your debts to a debt collection agency, there are a number of ways you can proactively try to avoid having debtors in the first place.

Here are some tips on how to avoid bad debt in the first place:

Know your Clients

Before engaging in a business relationship with a client or customer, you should, to the best of your ability, complete any reference checks. This will help discover if they are reliable. If they have a bad reputation for unpaid debts and poor communication, you should question whether you want to engage in a business relationship with them in the first place.

Set your Terms

Set out all of the terms of your agreement in your business and client relationship such as pricing, inclusions or exclusions, cancellation policies, payment terms and other relevant information. For your payment terms, aim to standardize them (e.g. every 30 days) so that if a client does not pay at the arranged time, you will then be able to follow up unpaid invoices. All of the terms that make up your agreement should be laid out in a contract.

Enter into a Contractual Agreement

A formal agreement should be entered when establishing a business relationship. A contractual agreement should include a signed document by all parties involved in the agreement which is time dated. This form should list the terms of your arrangement so both parties understand the nature of the agreement and what is involved. Never rely on a verbal understanding to form the basis of your dealings as it is difficult to trace this and use it as evidence that all parties were aware of the terms of the agreement when they signed. Once signed, this holds both parties accountable to upholding their side of the agreement.

Invoice on Time, Every time

When a business is punctual with their invoicing, this encourages positive payment habits from their clients. The sooner your client receives your invoices, the sooner they can make payment. If you ensure to invoice consistently, your client will understand that you are organized with your invoicing and will therefore likely be chasing up an invoice that is overdue.

Using an automated invoicing system to send and track invoices can be a worthwhile investment to save time and invoice consistently. Try Xero and also Debtor Daddy.

Follow up Unpaid Invoices

Be vigilant when following up unpaid invoices. Although do not be too aggressive. With their best intention, some client’s may have invoiced incorrectly – accidents happen – or are struggling to make the payment. If you maintain a high standard of being friendly and professional, the client will be more likely to make the payment when they are more capable of doing so. This also demonstrates to your client that you are reasonable whilst also being firm when dealing with finances.

Outsource to a Debt Collector

After negotiating further agreements, following up unpaid debts and when you are starting to question whether you should just let the money go, the final step is to outsource your debts to a debt collection agency.

Here at Debt Recoveries Australia, we specialize in recovering unpaid debts. Our job description is in the name! Instead of exhausting your time, by outsourcing your debts to an agency, you can continue to focus on making your business thrive whilst we go and recover unpaid debts for you.

Hungry for more? Here’s some more tips in a previous article : 8 Debt Prevention  Tips from a Debt Collection  Expert.

We hope you find these tips helpful! If you have any outstanding debts that needs to be collected, you can call us or you may  visit our website which lists our agreement fees, what we do, and how we do it.


Debt Recoveries Australia is the expert at recovering your outstanding debt without the drama. For more information, email at us or call 1300 799 511. Talk to us about your debt collection concerns via Skype at debtrecoveries.

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