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Debt can be deadly
Paula Beauchamp
October 31, 2007 12:00am

UNPAID debt was once seen as a cost of doing business.

Today, companies aggressively follow up overdue accounts and outsource debt collection more quickly and more often.

Peter Ansell, who heads Ansell Lawyers and runs Credit Works, a debt collection management business, says there's good reason for creditors to be proactive.

"Companies that demand their money first get paid first. If you're not proactive, chances are you will be put at the bottom of the debtors list," he said.

Mr Ansell said there was a risk that customers would treat businesses who offer credit - and let their accounts ride - as a bank.

"It is a good idea to monitor your debtor ledger on a regular and consistent basis to ensure it is not increasing," he said.

Australian Receivables Limited managing director Paul Cooney said every aspect of business was more clearly under the microscope today.

"Debt collection is part of that evolution," Mr Cooney said.

"Companies are looking for every cent. They are looking to reduce operating costs and wastage. Unpaid debt comes straight off the bottom line."

Councils and big businesses - from Melbourne City Council to the Metropolitan Ambulance Service - regularly tender out debt collection work and the trend is growing.

Banks and finance companies regularly sell their debts to professional collectors, freeing up staff and removing themselves from the process.

Mr Cooney predicts the trend will continue to grow.

"It's part of specialisation," he said.

"Companies are leaving debt collection to professionals, so they can focus on their core business."

Experts say it is now boom time in the industry with credit at an all time high.

MAS released its tender for debt collection services last week.

The company referred $16,688,970 worth of debt for collection in the 2006-07 year, according to MAS documents.

About 23 per cent, or $3,827,214 was recovered.

Overdue MAS accounts are automatically forwarded to a debt collection agency after 60 days.

MAS previously tendered out its external debt collection services in mid 2003. National Credit Management and Collection House won those contracts.

The current tender closes on November 20.
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