You've sent three reminder emails. Made two phone calls. The invoice is 60 days overdue and they're still ignoring you.
Now what?
Most Australian businesses exhaust their automated reminder systems (accounting software sends automated messages at 7, 14, 21 days), and are at a loss if it fails to recover the unpaid invoice.
Then they're faced with two binary choices:
Nice: keep sending the same polite reminders (losing money while recovery probability drops).
Nuclear: jump straight to aggressive legal threats (burning money and bridges unnecessarily).
But there's a way to keep your money and the customer, and it's the gap between nice and nuclear.
The solution: the FINAL NOTICE 6-Stage Recovery System - a structured escalation framework designed specifically for Australian compliance requirements.
This system handles the progression from professional notices through to credit reporting and legal action (when necessary), with clear triggers at each stage and full regulatory compliance.
Why Most Businesses Fail at Debt Recovery
The common mistakes:
Mistake 1: Endless automated reminders
Accounting software sends messages at 7, 14, 21, 28 days. All ignored. You keep the automation running, hoping it will eventually work. It won't. Automated reminders only work on clients who were planning to pay anyway.
Mistake 2: Jumping from nice to nuclear
First reminder is friendly. Second reminder threatens court. This destroys relationships and often backfires. Debtors double-down, and most won't likely buy from you again. This can jeopardise your future revenue by losing the customer lifetime value (CLV). But it doesn't have to be this way. There are professional escalation stages in between.
Mistake 3: Ignoring compliance requirements
Credit reporting has strict OAIC regulations. Skip the 14-day notice? Your listing gets challenged and you face penalties. Send threats without following through? You lose all credibility.
What works: The FINAL NOTICE system - structured escalation that matches pressure to situation while maintaining full Australian regulatory compliance.
The FINAL NOTICE 6-Stage Recovery System
This framework guides you through escalating collection pressure systematically, matching each stage to debt age and debtor behavior while maintaining compliance with ACCC, ASIC, and OAIC regulations.
Quick reference:
| Stage | Timeline | Cost | Compliance |
|---|---|---|---|
| Pre-Escalation: DIY Reminders | Days 7-28 | $0 | None (business communication) |
| Stage 1: First Formal Notice | Day 30 | $0-50 | Notice #1 for credit reporting |
| Stage 2: Follow-up Notice | Day 45 | $0-30 | Escalation warning |
| Stage 3: Credit Warning + Demand | Day 60+ | $0-100 | 14-day credit notice (OAIC) |
| Stage 4: Credit Reporting | Day 74+ | $50-300 | 14+ days after Stage 3 |
| Stage 5: Legal Action | Day 67+ | $500-5000+ | Court filing (client authority) |
| Stage 6: Enforcement | Post-judgment | $100-500+ | Sheriff/garnishment (client authority) |
Pre-Escalation: Your Internal Reminders (Days 7-28)
Purpose: Handle legitimate oversights, payment processing delays, and good-faith late payers using your own systems before engaging professional recovery.
Who handles: You send these directly from your business (usually via accounting software automation).
When to use: First 28 days after payment due date.
Compliance notes: No formal compliance requirements. This is normal business-to-business communication.
Most accounting systems handle this automatically: Xero, MYOB, QuickBooks all send reminders at 7, 14, 21, and 28 days overdue. Check your settings to confirm they're enabled.
If you're doing this manually: Set calendar reminders and send the messages below at each interval.
The Polite Reminder
7 Days Overdue
This is usually automated. Most accounting software handles this.
If you're doing it manually, here's what to send.
Hi [Name],
Reminder: Invoice #[NUMBER] for $[AMOUNT] due on [DATE] is overdue.
Payment can be made via [PAYMENT METHODS].
If this has already been paid, please disregard this message.
Questions? Contact [CONTACT].
Kind regards, [Business Name]Neutral. Professional. Assumes the best. Most legitimate oversights get resolved here.
The Formal Follow-Up
14 Days Overdue
This is often automated too. Check your accounting software settings.
If the automated reminder hasn't worked, this message goes firmer.
Hi [Name],
Invoice #[NUMBER] for $[AMOUNT] is 14 days overdue (due date: [DATE]).Payment is expected within the next 3 business days.
If payment has been made, please forward confirmation to [EMAIL]. If there are any issues with this invoice, contact [CONTACT] to discuss.
Regards,
[Business Name] Accounts ReceivableStates the problem. Sets a clear timeframe. Opens the door for genuine issues. The "Accounts Receivable" signature keeps it professional, not personal.
The Firm Notice
21 Days Overdue
Automated reminders have failed. Two manual messages sent. No response.
Time to make the consequences clear.
Hi [Name],
21 days overdue: Invoice #[NUMBER] for $[AMOUNT].**Payment received by 5pm on [DATE] avoids escalation to formal debt recovery proceedings.**
Facing financial difficulty? Contact [CONTACT] before [DATE] to discuss payment arrangements.
Failure to respond or arrange payment will result in this matter being escalated.
[Business Name] Accounts ReceivableDirect. Clear deadline. Specific consequence. Offers a payment plan option (reasonable) but makes escalation explicit. The word "escalation" signals boundaries.
The Final Demand
28 Days Overdue
Three messages sent. Four weeks overdue. Multiple opportunities to respond.
This is the last communication before action.
Hi [Name],
**FINAL DEMAND: 28 days overdue - Invoice #[NUMBER] ($[AMOUNT]).**
Payment pending despite multiple reminders sent. No response received.
**Full payment to be received by 5pm on [DATE] or matter is sent to external debt recovery.**Debt recovery means:
- Recovery fees increase the amount owed - Credit reporting may be affected - Legal proceedings may be commenced**Contact [CONTACT] before [DATE] to discuss options.**
If no communication is received by this date, escalation begins and all communication is handled by third-party recovery services.
[Business Name] Credit ControlNo negotiation. Clear deadline. Explicit consequences. The "Credit Control" signature signals this has moved beyond accounts receivable.
Reality check: At this stage, decide whether the debt is worth pursuing. Consider the debt amount, the debtor's behaviour and your documentation quality.
The Referral Notice
30+ Days Overdue
Payment deadline passed. No response. Decision made to pursue recovery.
This message is notification, not negotiation.
[Name],
Invoice #[NUMBER] for $[AMOUNT] has been referred to FINAL NOTICE for collection as of [DATE].
All future correspondence regarding this debt should be directed to:
FINAL NOTICE[CONTACT DETAILS]
Their team will contact you within 48 hours regarding payment arrangements and additional recovery fees.
[Business Name] Credit ControlFactual. Brief. Professional. The matter is closed from your end. Critical: Only send this after actually referring the debt. Empty threats destroy credibility.
When to move from Pre-Escalation to Professional Recovery:
Engage FINAL NOTICE when:
- Day 28 deadline passes with no payment
- No response to any of the four reminders
- Debtor is evasive or making vague promises
- You want professional handling from this point forward
Stay in Pre-Escalation when:
- Debtor responds and commits to specific payment date within 7 days
- Payment arrives
- Debtor proposes credible payment plan and makes first payment immediately
- Legitimate dispute emerges with supporting evidence
Cost of Pre-Escalation: $0 (your time: approximately 2 hours total across 28 days for tracking and manual follow-ups if not automated)
Stage 1: First Formal Notice (Day 30) - FINAL NOTICE
Purpose: First formal collection notice from FINAL NOTICE. Establishes compliance foundation for potential credit reporting.
Who handles: FINAL NOTICE sends this on your behalf after you refer the debt.
When this happens: Day 30 after payment due date (invoice is 30 days overdue).
Compliance requirement: This serves as Notice #1 for OAIC credit reporting requirements. Two notices separated by at least 30 days are required before credit reporting is allowed.
Stage 2: Follow-up Notice (Day 45) - FINAL NOTICE
Purpose: Reminder escalation and final warning before credit reporting and legal demand.
Who handles: FINAL NOTICE.
When this happens: Day 45 after payment due date (15 days after Stage 1 notice).
Stage 3: Credit Warning + Letter of Demand (Day 60+) - FINAL NOTICE
Purpose: Combined credit reporting warning (required by OAIC) and formal legal demand.
Who handles: FINAL NOTICE (Letter of Demand portion may be sent by lawyer on law firm letterhead for higher-value debts with client approval).
When this happens: Day 60+ after payment due date (at least 30 days after Stage 1 notice).
Compliance requirements:
- OAIC credit reporting: Must provide 14 days written notice before reporting to credit bureaus
- Letter of Demand: Legal requirement before court proceedings, typically 7-14 day payment deadline
- Timing: This is Notice #2 for credit reporting (at least 30 days after Notice #1 in Stage 1)
Stage 4: Credit Bureau Reporting (Day 74+) - FINAL NOTICE
Purpose: Report the default to credit reporting agencies, creating long-term consequences for debtor.
Who handles: FINAL NOTICE reports on your behalf.
When this happens: Minimum Day 74 (14 days after Stage 3 notice sent on Day 60).
Compliance requirements (OAIC regulations):
- Debt must exceed $150
- Debtor must be over 18 (individuals) or registered company (businesses)
- Must have provided 14 days written notice of intention to report (Stage 3)
- At least 60 days must have passed since payment was due
- Debt cannot be disputed with supporting evidence
- Information reported must be accurate
Cost: $50-100 per agency (typically report to all three)
What happens:
- Default appears on debtor's credit file within 7-14 days
- Remains on file for 5 years from date of listing
- Visible to all credit providers, lenders, lessors who check credit
- Damages credit score (typically 100-200 point drop)
Stage 5: Legal Action (Day 67+) - Requires Client Authority
Purpose: Obtain court judgment for the debt, creating legal enforcement options.
Who handles: You file yourself (small claims), or lawyer files on your behalf, or FINAL NOTICE can coordinate with legal partners.
Client decision required: FINAL NOTICE will present legal action options and cost/benefit analysis. You authorise whether to proceed and commit to legal costs.
Cost: $200-5,000+ depending on pathway chosen. Client is responsible for legal costs.
Pathway A: Small Claims Tribunal
Best for: Debts under state threshold, simpler faster process, minimal legal cost.
Thresholds by state:
- NSW: Up to $20,000 (NCAT)
- VIC: Up to $10,000 (VCAT)
- QLD: Up to $25,000 (QCAT)
- WA: Up to $10,000 (Magistrates Court)
- SA: Up to $12,000 (Magistrates Court)
- TAS: Up to $5,000 (Magistrates Court)
- ACT: Up to $25,000 (ACAT)
- NT: Up to $25,000 (NTCAT)
Cost: $50-300 filing fee (varies by state and claim amount)
Pathway B: Statutory Demand (Companies Only, Debt Over $4,000)
Best for: Debts over $4,000 owed by registered companies (Pty Ltd, Ltd - NOT sole traders or partnerships).
What it is: Legal demand under Corporations Act 2001 Section 459E. Company has 21 days to pay or prove genuine dispute, or they're presumed insolvent and you can apply to wind them up.
Cost:
- DIY: $0 (form is free from ASIC website)
- Process server: $100-200 (ensures proper service)
- Lawyer to draft: $500-1,000 (recommended)
Stage 6: Enforcement (Post-Judgment) - Requires Client Authority
Purpose: Actually collect the money after winning judgment.
Who handles: Sheriff (for writs), court (for garnishments), or FINAL NOTICE coordinates enforcement with your authority.
Client decision required: Each enforcement action has additional costs. FINAL NOTICE will present options and expected outcomes. You authorise which enforcement methods to pursue.
Reality check: 40-60% of court judgments never get fully collected. Debtor may have no seizable assets, may have hidden assets, or may simply ignore the judgment.
Enforcement Option A: Writ of Execution (Sheriff Seizure)
What happens: Sheriff visits debtor's premises, seizes assets (vehicles, equipment, inventory), sells at auction, proceeds paid to you.
Cost: $150-300 (writ) + 10-15% of recovered amount (sheriff fees)
Enforcement Option B: Garnishment Orders
Three types:
- Bank Garnishment: Court orders bank to freeze account, pay you from balance
- Wage Garnishment: Employer deducts from wages, pays you directly
- Third-Party Debt Garnishment: Someone who owes debtor money pays you instead
Cost: $100-300 per garnishment order
How FINAL NOTICE Works With You
Automatic (No Client Authority Needed):
- Stages 1-4: FINAL NOTICE handles all communication, notices, and credit reporting automatically once you refer the debt
- Progress updates provided regularly
- Debtor payments go directly to you (FINAL NOTICE invoices you for service fees)
Requires Your Authority:
- Stage 5 (Legal Action): FINAL NOTICE presents legal options with cost/benefit analysis. You decide whether to proceed and authorise legal costs.
- Stage 6 (Enforcement): If judgment obtained but unpaid, FINAL NOTICE recommends enforcement methods. You authorise which to pursue and cover costs.
The Decision Matrix: Which Stage When?
By Debt Amount:
Under $1,000:
- Pre-Escalation + Stages 1-3 only
- Stage 4 (credit reporting) if over $150
- Legal action rarely worth it (costs exceed recovery)
- Write off if Stages 1-4 fail
$1,000-$5,000:
- All stages through Stage 4
- Stage 5 (small claims) only if under your state threshold
- Enforcement often not cost-effective
$5,000-$20,000:
- All stages available
- Small claims most cost-effective
- Enforcement justified if you win judgment
- This is the "sweet spot" for debt recovery
Over $20,000:
- All stages recommended
- Consider lawyer involvement from Stage 3 onwards
- Statutory demand (if company debtor and over $4K)
- Enforcement strongly justified
By Debt Age:
0-30 days overdue:
- Pre-Escalation only
- Too early for formal action
31-60 days overdue:
- Stage 1 (Day 30)
- Stage 2 (Day 45)
- Compliance clock starts
61-90 days overdue:
- Stage 3 (Day 60+) - credit warning + letter of demand
- Stage 4 (Day 74+) - credit reporting
- Stage 5 (Day 67+) - legal action begins
90+ days overdue:
- Legal action should be underway
- Enforcement likely needed even if you win judgment
- Consider write-off if debtor has no assets
Frequently Asked Questions
How long does debt recovery take in Australia?
Pre-Escalation through Stage 4:
- Days 7-28: Pre-escalation reminders
- Day 30: Stage 1 (first formal notice)
- Day 45: Stage 2 (follow-up)
- Day 60: Stage 3 (credit warning + demand)
- Day 74: Stage 4 (credit reporting)
- Total: 74 days (2.5 months) to complete stages 1-4
Adding legal action:
- Small claims: Day 67+ to file, plus 8-16 weeks to judgment = 4-6 months total
- Statutory demand: Day 67+ to serve, 21 days to pay/dispute = 3-4 months total
Can I report unpaid invoices to credit agencies?
Yes, if ALL of these conditions are met:
- Debt exceeds $150 (minimum threshold)
- Debtor is over 18 years old OR registered company
- Provided written notice of intention to report at least 14 days before listing
- At least 60 days have passed since payment was originally due
- Debt is not disputed with supporting evidence
- Information reported is accurate
Impact on debtor:
- Remains on credit file for 5 years
- Damages credit score (100-200 point drop typical)
- Makes it difficult to get loans, finance, leases
When should I escalate to legal action?
Escalate when:
- Stages 1-3 have failed (60+ days, no payment, no response)
- Debt amount justifies cost (minimum $2,000 for small claims)
- Debtor appears solvent (has business, assets, income)
- Documentation is strong (clear invoice, proof of delivery, no genuine dispute)
Don't escalate when:
- Debt is too small (under $1,000)
- Debtor is clearly insolvent
- Documentation is weak
- Genuine dispute exists
Compliance Summary
Key regulatory requirements for Australian debt recovery:
OAIC (Office of Australian Information Commissioner) - Credit Reporting:
- Minimum 14 days written notice before reporting
- Debt must be 60+ days overdue
- Debt must exceed $150
- Cannot report disputed debts (with evidence)
- Must update if paid
- Must correct if inaccurate
ACCC (Australian Competition and Consumer Commission) - Debt Collection:
- Cannot harass or coerce
- Cannot contact at unreasonable hours
- Cannot disclose debt to third parties (except agencies, lawyers)
- Cannot misrepresent authority or consequences
Corporations Act 2001 (Statutory Demands):
- Form 509H must be used
- Must be served correctly
- Company has 21 days to respond
- Only for debts over $4,000
- Only for companies (not individuals/sole traders)
Non-compliance consequences:
- Credit listing challenged and removed
- OAIC investigation and penalties
- ACCC enforcement action
- Your costs wasted (invalid statutory demand, improper credit listing)
The Bottom Line
Debt recovery is systematic escalation through 6 stages:
- Pre-Escalation (Days 7-28): DIY reminders, assume good faith
- Stage 1 (Day 30): First formal notice from FINAL NOTICE, credit reporting foundation
- Stage 2 (Day 45): Follow-up reminder, escalation warning
- Stage 3 (Day 60+): Credit warning + legal demand combined
- Stage 4 (Day 74+): Credit bureau reporting (consequences)
- Stage 5 (Day 67+): Legal action with client authority
- Stage 6 (Post-judgment): Enforcement with client authority
Critical compliance requirements:
- 14 days notice before credit reporting (Stage 3 to Stage 4 minimum gap)
- 30 days from first notice to credit eligibility (Stage 1 to Stage 3 minimum gap)
- Accurate information, proper delivery methods, respect for disputes
The key principles:
- Match pressure to situation (escalate systematically, not randomly)
- Follow compliance timelines (14-day credit notice, 30-day gap requirements)
- Act faster as debt ages (recovery drops significantly after 30 days)
- Know when to stop (if debtor insolvent or debt too small, write off)
- Document everything (notices, delivery proof, responses)
- Consider professional help (FINAL NOTICE handles Stages 1-4 automatically)
Every week of delay costs you recovery probability.
The biggest mistake: Endless reminders without escalation. Waiting. Hoping.
The biggest success factor: Following this system with clear triggers, proper timing, and compliance with Australian regulations.
Use the system. Document everything. Escalate on schedule. Get what's yours.