In today’s economic climate, debt collection is more than just a financial housekeeping task. It is a survival strategy.
As business debt recovery becomes increasingly more complex, waiting too long to act on non-payment can leave your small business as just another unsecured creditor in a liquidation. Debtors may offer excuses, promise future payment, or ask for extensions, but these are often simply delay tactics.
Those who act fast and follow through with a clear business debt collection process, including statutory demands and liquidation proceedings, are far more likely to get paid.
If you are owed money, you should avoid granting extensions to pay. Now is not the time to be listening to promises to pay, or to be listening to excuses.
In the current market, insolvencies are at an all time high. The construction industry in particular is overrepresented in the insolvency statistics. So now is definitely not the time to wait, because those who do wait end up with outstanding debts and as creditors in liquidations.
Debtors tend to try and delay paying debts, especially when they cannot pay. They may make excuses, or make promises – often ones they are unable to keep.
You may have heard the saying: “the squeaky wheel gets the oil”. It is particularly applicable in debt-collection strategies. That means you should ensure your business has a process for collecting outstanding debts, and follows it. If your trade terms say the invoice falls due in seven days, have a plan in place for what happens on day eight if the debt remains outstanding by then. Ensure there are processes in place for outstanding debts at day 14, day 30, 60, 90 etc.
The first step is to define your business debt recovery process and follow it, rather than to listen to excuses from debtors.
Many of our clients come to us for help when the debt has already been owing for six months, or a year, or more. That is too long to allow business debts to remain outstanding, and by then it makes it much more difficult to recover the debt or a substantial portion of it.
Rather than wait, it may be better to issue a statutory demand once the debt is outstanding. The statutory demand is a last chance for the debtor to pay, and if they still do not pay within 15 working days, you are entitled to apply to the High Court to liquidate their company.
Then, if they do not pay within the time allowed in the statutory demand, proceed with liquidation proceedings, because that will make you a higher priority-ranked creditor of that company.
The key message is to be decisive, and be proactive. Do not wait for promises to be broken. Instead, take control. Here is how the debt collection process can work in your favour when used proactively.
In the realm of debt recovery, the objective is to get paid. When a debtor company owes you money, it is not just a financial hiccup; it could be a matter of survival for your business. Unpaid invoices and outstanding debts can strangle your cash flow and expose your business to unnecessary risk.
Liquidation proceedings offer one of the most effective ways to take control of the situation. Acting early, before a debtor initiates voluntary liquidation, can help you avoid delays and protect your financial position. It is a proven strategy that many collection agencies and debt recovery specialists recommend, especially in today’s high-risk market.
In business debt collection, it is essential to understand that debtor companies often owe money to multiple creditors. You are likely not the only creditor, so as a creditor you want to be prioritised over other creditors insofar as possible.
Here is why being the loudest and most persistent creditor matters:
Another compelling reason to initiate liquidation proceedings is to prevent shareholders from voluntarily liquidating the company. This may seem like a nuanced point, but it can have a significant impact on the outcome. Here’s why:
In practice, many legal experts advise clients to initiate liquidation proceedings because it provides a strategic advantage. Here is how it typically plays out:
If you find yourself in a situation where a debtor company owes your small business money, it’s advisable to seek legal counsel. If you want to maximise your chances of debt recovery, do not hesitate to explore this option.
Norling Law has specialists in large and small business debt recovery and insolvency, and we can help you identify the right strategy to recover your money before it is too late. Our team supports New Zealand businesses of all sizes in pursuing fair, legal, and effective collection strategies.
When you are dealing with a debtor company, consider the strategic advantages of initiating liquidation proceedings. It is not about forcing a company into liquidation; it is about leveraging the process to secure your rightful payment. Be the loudest creditor, and take control of the liquidation proceedings to tilt the odds in your favour. Your financial health depends on it.
Hope is not a strategy! If your business is owed money and you are serious about recovery, now is the time to act. We offer a free 30-minute legal consultation where we can discuss the issues and move forward with a tailored debt collection strategy.
Brent is the Director of Norling Law. He has a wealth of experience in the District Court, High Court, Court of Appeal and Supreme Court. Brent is passionate about negotiating favourable outcomes for his clients and able to implement this in his daily negotiations.
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