29 March 2018
Legal action can be a very helpful tool for small business struggling with late payments.
Yet, the prospect of doing the legal thing can be a bit scary.
The legal world, like the economics profession has a habit of using language that makes the simple appear horrendously complex. Acronyms such as “NOP” seem like a treatment for an inner ear infection as opposed to something useful.
We think it’s important for small businesses to understand the basics. Legal action is another string in your bow in getting back what’s yours.
GETTING THE BALL ROLLING
In most instances if you want to start legal action you will need to complete a statement of claim and a notice of proceeding and a statement of claim.
Once these documents are supplied or “served” as it’s known, the person has 25 working days to file a Statement of Defence if they are living in New Zealand. They don’t file or pay, you can apply to the court for a judgment on your claim (ie a judgment order).
Crucially starting legal proceedings doesn’t mean guaranteed instant success. For example, if the amount is disputed and a decision cannot be reached the court may refer you to the disputes tribunal, if the amount is under $15,000.
In the following graphic we have presented some of the legal tools at your disposal.
WHEN SHOULD I GO DOWN THE LEGAL ROUTE?
There are some general rules of thumb.
- First, you should have made every effort to collect the amount outstanding as part of your invoicing process.
- Secondly, the amount should be big enough that it’s worth the effort.
THE IMPORTANCE OF SEEKING EXPERTISE
A DIY legal approach isn’t for the faint hearted. You can’t really “wing it” like Dennis Denuto’s character in the much loved Australian film the Castle. Taking legal action for recovering a debt does require knowledge of court processes and the relevant legislation.
Seeking the support and input from someone with experience in using legal tools for debt collection will give you a much greater chance of a positive outcome.
At Baycorp we have a specialist team who can develop legal strategies for your situation and guide you through the process. To find out more, please call 0800 229 267 or click here