Chasing debts is tough. At first, you might hear promises the account will be paid soon; “We’ll pay you by the end of the week.” A little later, the customer might become more defensive; “We told you we’d pay you.” Then you might not be able to reach the client at all.

Unfortunately, this is an all-too familiar situation for most businesses. But are these sorts of accounts just outstanding or are they bad debts? If the debt is genuinely bad, you can write it off this financial year, which can reduce your tax and allow you to claim a GST credit. But how do you know if a debt is bad?

The Australian Taxation Office has clear rules*about how to determine whether an account is simply overdue, or whether it’s bad.

Much of it comes down to making sure you have taken the right steps to recover the debt – and not simply written it off without following the correct processes.

So we’ve developed a five-step process to follow to make sure you’re operating within tax law:

1. Have you issued a reminder notice?
2. Have you contacted the client by phone and mail?
3. Have you issued a formal notice of demand?
4. Have you issued and served a Summons (Claim) and obtained Judgment?
5. Have you commenced an action to enforce Judgment?

But even after you’ve run through some or all of these steps it can be tough to work out whether a debt is bad or simply overdue. If you need help in taking any of these steps or are unsure it’s worth consulting a debt recovery agency that has proven results to increase your chances of timely recovery and to ensure if the debt is bad, you can write it off in the current financial year.

Optimum Recoveries works with businesses to lift their debt recovery rates improve their credit management policies and increase their cash flow.

Contact our award-winning team today to ensure your outstanding accounts and debts are in order by the end of the financial year. 

www.optimumrecoveries.com.au

orqld@optimumrecoveries.com.au

Phone: 1300 556 937

*Australian Taxation office Taxation Ruling 92/18(S32).