Record keeping is not one of the most exciting topics but good record keeping can make the difference between getting paid or not. By keeping good records it will most likely make it easier for a dispute to be settled promptly – this is especially important as the longer a debt remains outstanding the greater the likelihood that you will either not get paid or be required to take the matter to Court. Either of these two options will prove costly to your business.
Here are some of the benefits for maintaining good record keeping:
1. Meeting the ASIC and ACCC Debt Collection Guidelines
These guidelines were issued in July 2014. They provide extensive guidelines in relation to what record keeping must be maintained. Importantly, you are required to maintain accurate, complete and up to date records of all communications with debtors. This includes time, date and nature of calls about the debt, details of any visits in person and copies of all written correspondence sent.
It is also important to keep up to date records of any settlements – whether partial or complete – and they need to include the date, amount and payment method used
The guidelines also state that you must supply a debtor with requests for documents (including contracts) and information as soon as possible. If this is not done, in some circumstances, it may constitute misleading, deceptive conduct or unconscionable conduct. If your record keeping has not been kept up to date it may prove extremely difficult to provide information when a debtor requests it on a timely basis.
2. Ability to Assess your Debtors More Easily
When you have up to date records you can more easily assess the risk of your debtors. If, for example, a customer requests an increase in their credit limit from say $10,000 to $20,000 you can check your records to find out if the customer has been paying his invoices on time.
For example, if your records show that you chased the customer nearly every month because his invoices have gone past their due date of payment, then it is unlikely that you would want to extend further credit to them.
Another benefit of up to date record keeping is that you can do periodic reviews of your debtors – which can highlight potential problems before they happen. It can also trigger the need to find out more about your debtors – including obtaining an ASIC check.
3. Ability to Determine Whether a Debt is Statute Barred
Accurate record keeping will assist in determining whether a debt is statute-barred. This is because it will make it easier to identify and calculate relevant dates to determine the limitation period. A statute-barred debt is one that you cannot pursue in court due to certain passing of time. It varies from state to state, but is usually six years (three years for the Northern Territory) from the date the right of action accrued or the debt was last acknowledged by the debtor (e.g. by making a payment).
This means if you do not have all the information recorded about the debt you may not be able to prove that the debt is within the relevant time period.
This all sounds good but how can you implement good record keeping in practice? The best way to approach record keeping is to prepare templates etc in advance –both electronic or manual. This means when you are on the phone to your debtor you can type up the notes of your conservation immediately. Most importantly, make sure that you take a back up of your data so there is no chance of you losing it.
Another benefit of having detailed records of your dealings with your debtor is that you have all your notes ready to hand over to a debt collector if you require extra assistance in collecting a debt.