3 X Easy Steps to Collecting Outstanding Accounts

Collecting Outstanding Accounts

 Essentially Debt Collection Made Easy


Today we are going to discuss the 3 easy steps you can implement to save your business the expense, time and aggravation of having to continually chase up your outstanding accounts.  Essentially Debt Collection Made Easy.

The key points we are going to discuss today,

  • How to build Consequences into your business,
  • How to take back control of your accounts,
  • How to make sure you can get accounts paid on time,

As nearly everyone knows, Debt Collection and Cash Flow Management or the need to continually follow up outstanding accounts is the leading contributor to a business’s lack of cash flow, which is often the biggest cause of business failures in the first 5 years.

As a Debt Collection Agency and working as Debt Collectors for over the last 35 years, and having spoken to hundreds if not thousands of small to medium-sized businesses, (being businesses up to around two hundred and fifty employees), what we've found is that these businesses are run by people with passion and that passion is generally for fixing, building, servicing, or like us providing services for other business. It's certainly not a passion for cash flow management and chasing their outstanding accounts, because let's face it, Debt Collection can be annoying and a hard task to perform.

Let’s face it debt collection is one aspect of business no one really likes to do. It can be very frustrating; it can take enormous amounts of time. It can affect your staff’s attitude towards your clients and given that your staff are probably not professional debt collectors, the results can be very hit and miss. Essentially, using an enormous amount of your business resources trying to chase existing outstanding accounts, when your staff should be concentrating their time on bringing in new revenue not collecting revenue you have already made. But there is a better way?

As I said earlier, over the last 35 years in dealing with businesses we have come to realise that there are two main concerns businesses have when it comes to looking to outsource the collection of their outstanding accounts.

They Are,

  • How will this affect the relationship with my clients,
  • How much is this going to cost,

What most businesses don't understand, is that the collection of outstanding accounts hasn’t always been this way.

It Hasn't Always Been This Way

Over the last 20 to 30 years legislation has slowly changed and swung the pendulum from favouring the Creditor (the person supplying the product or service) to that of the Debtor. To the point that when a business finds itself having to chase its outstanding accounts, the options can be quite limited.

So, what’s the answer, well it’s not as hard as you probably think, a business just needs to swing the pendulum back to favouring itself.

And to do that a business just needs to build in some consequence to their clients for not paying their outstanding accounts.

Adding Additional Costs and Marking A Debtors Credit File

Having the ability to add additional costs such as collection costs, administration costs and penalty interest into your Terms and Conditions is a real incentive to encourage your clients to settle their accounts on time, negating the need to refer their account to a debt collection company.

Secondly, ensuring you have a Privacy Waiver incorporated into your Terms and Conditions giving your business the legal ability to "Mark A Debtors Credit File" is another major incentive in encouraging your businesses client into settling their accounts on time. 

Once you can do those two things, you are starting to wrestle back control of the credit management aspect of your business as there are no consequences when someone fails to meet their financial commitments.

These sorts of clauses and normally included in your Terms and Conditions. If you don't have the ability to mark a debtor’s credit file, or you don’t have the ability to on-charge costs, you probably need to review your existing Terms and Conditions.

Maintaining Your Client Relationships

As I mentioned earlier this is one of the key reasons that a business may be hesitant to engage an external company when it comes to collecting their outstanding accounts. (excluding the importance of maintaining a relationship with a client who doesn't meet their financial obligations).

As a debt collection company, we do have a basic collection process that we run over a 30 to 45 day period. It includes Personal Contacts, Letters of Demand, Notices of Intention, Notices of Breach etc, culminating in marking the debtors' credit file should they fail to settle their outstanding account.

However, before all that starts happening the first thing we do after our initial investigations is to call your client to see if there were any issues, essentially giving them the benefit of the doubt.

It’s amazing what happens when they get a call from a third party explaining that we are now acting on our clients’ behalf (your behalf) but before we pull out the big guns, here is your opportunity to pay.

It may just be a simple dispute which needs to be rectified. Almost half of the issues we follow up on behalf of our clients involves minor disputes between our clients and their customers. We, therefore, encourage our clients to submit their outstanding accounts to us quickly, (no more than 30 days overdue) ensuring their customer's outstanding account is still fresh in the Debtors mind. This helps ensure the accounts in question get resolved quicker, resulting in debtors settling their outstanding accounts sooner, ensuring that the relationship between our clients and their customers is maintained.

Of course, the added benefit is that next time they receive an invoice from our clients business, they are probably going to treat it with a high priority than what they had previously. Essentially wrestling back control of the credit management aspect of our client's business. Which as I indicated earlier, is simply achieved by letting your clients know that there are consequences when they fail to meet their financial obligations.

Costs Of Inaction

Over the years one thing we have noticed is that most businesses don’t really understand the costs of having outstanding accounts, what that cost is to their cash flow, let alone the invoice value when one or more of their clients fails to meet their financial obligations. Which in today’s economic climate is pretty common.

This is mainly due to the fact that trying to judge what the costs are for each business varies with each business, as each business is different, let alone the impact to that business, and then trying to convert that impact into a dollar figure. It's almost impossible, but there are the standard costs which most people could easily identify. These are such costs as your staff costs, your communication costs, if you have an overdraft, you have the interest rate on your overdraft. A big cost to most businesses is the company credit card, whose interest rate is running at about 1.5% to 1.7% per month. So, there are some tangible costs you can consider.

However, there are also some intangible costs such as opportunity costs. Opportunity costs are one aspect that very few business owners consider, and that is, if I had of had that money paid into my account today, could I have taken advantage of that special that my supplier was willing to offer me. Could I have run a new marketing campaign that would have generated additional revenue? Could I have employed that new staff member, which again would have had an increase in my revenue? Could have taken my staff off chasing outstanding and utilised them better by allocating them to a task that produces revenue. So, as you can appreciate it's very, very, hard to identify, which is why, if you try and ask someone what the costs are for having outstanding accounts. It's almost impossible to get an answer, but I think we've got one for you.

Now as a Debt Collection Agency with over 35 years’ experience it becomes pretty obvious to us what costs are to our clients are when the clients fail to meet their financial obligations. The problem is how do you explain it, let alone allocating a dollar figure? In order to illustrate a dollar figure what we've done is turn to the Australian legal system. I don't know whether you picked up in our earlier conversation when we supply our clients their Terms and Conditions, we also include the ability to not only on-charge collection costs and legal fees we also include the ability to on-charge a Penalty Interest rate. This is always 2.5% per month.

Now there's a reason why we set our penalty interest rate at 2.5% per month, and that’s because that’s what the Australian Legal System has deemed to be a fair amount when awarding costs for lost income due to an outstanding account. So, in other words, if you were to go into court and you were to win a judgement and you asked the judge to award costs, they will generally settle on 2.5% of the invoice value per month the account was outstanding. If you ask for anything over 2.5% then generally the judge will not award you costs. Now I am not saying that is the same with all judges in all court cases, of course, every judge is different. But generally, across the board, 2.5% per month is considered a fair amount to cover the costs of having an outstanding account. So, in other words, if you have a $1000 outstanding account that has been outstanding for four months.

$1000 x 2.5% x 4 MThs     = $100

Therefore based on the above scenario a business would not only seek to recover their initial $1000 associated with your outstanding invoice, and our collection commission, but they would also legally on-charge a $100 penalty interest rate fee.

Therefore it is safe to assume that the real cost of having an outstanding account is approximately 2.5% / Month.

Assuming you have a $10 000 outstanding account, and your business has a 20% profit margin, the costs to your business probably looks something like this,






Invoice Profit Margin




$10 000





$10 000





$10 000






As the below Infographic illustrates this begins to look a lot worse when you start combining your accumulated outstanding invoices over a 2,4 or 6-month basis.

Collecting Outstanding Accounts

As the above Infographic Illustrates when a business looks at the combined Outstanding Invoice Values the picture becomes a lot clearer.


Invoice Value

Losses After
2 Months

Losses after
4 Months

Losses after 6 Months

$50 000

$2 500

$5 000

$7 500

$100 000

$5 000

$10 000

$15 000

$200 000

$10 000

$20 000

$30 000

$500 000

$25 000

$50 000

$75 000

So, I hope that helps clarify the situation. For every month your accounts remain outstanding it costs you 2.5%. If your accounts are outstanding for 2 months then it’s costing you 5 %, 3 months 7.5%, 4 months 10% and so on. Furthermore, if your businesses profit margin is only 20%, you have already lost half the profit on that invoice just by having your clients drag out their payment.

Businesses who worry about the costs of using an external company to collect their outstanding accounts, don’t realise that it costs a hell of a lot more not to.

Remembering if you have up to date Terms and Conditions you're more than likely able to on-charge any collection costs onto your delinquent debtors.

Getting Paid Ontime.

So, staying on top of your outstanding accounts, and getting them in for collection, remembering you can still keep that relationship, quickly is paramount, because you may send them to collections once, maybe twice, but I guarantee you won’t need to send them for collections a third time.

Every business knows, whether they want to admit it or not, every business has 3 boxes.

Box No. 1 is for businesses they must pay straight away and are a priority,

Box No. 2 is for businesses that want to pay as soon as possible, and

Box No. 3 is for businesses they will pay when they get around to it.

A workable credit management system shifts your business from Box No 3 to Box No 1. 

Remember, your business is only one of the 30 to 40 creditors your clients may deal with on a daily basis. It doesn’t make any difference to their business to pay your business when your invoices are due, but it does make a hell of a lot of difference to yours. Let them drag out businesses that aren’t one of our clients.

That’s how a business can take back control of its cash flow. It’s not about continually sending outstanding accounts to an external collection company; it’s about re-educating your clients into treating your business as a priority instead of paying you whenever they feel like it.

That’s the secret to increasing your cash flow and ensuring your business is there for the long haul, and to be perfectly honest, after our clients spend a couple of months following our program, their usual response is that had never realised that they had so much money.

This is usually due to the fact that if were been perfectly honest when they became CCA clients and analysed their outstanding accounts at the time, they usually found that they had a number of outstanding accounts sitting at 60+, 90+ and 120+ days overdue.

If you would like to know more about "How You Use Our 3 X Easy Steps To Collecting Your Oustanding Accounts" please feel free to request our FREE Facts Sheet here.

That’s It From Me, Until Next Time

Have a Great Day

Paul Tweedie



With over 35 years’ experience Collection Consultancy Australia prides itself in offering Products and Services designed to Protect Business Assets and Cashflow. Quite often the process can start from simply making business owners aware that there is option available, through to business specific solutions and education. We are here to let business owners know that there can be a better way to secure their financial future.

Company Address

PO Box 7160,
East Brisbane QLD 4169.

Phone: 1300 565 988.


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