Start the New Financial Year on Stronger Financial Footing
As we kick off the new financial year, it's an important time for companies to review their debtor's ledger and clear outstanding debts that be lingering from FY2024-25.
Too often, bad debt is placed in the "too hard" basket and left dormant, making recovery more challenging as time goes on. “Clearing bad debt early positions your company for improved liquidity, better creditworthiness, and more effective budgeting,” says Natalie Markovski, Head of Disputes + Litigation at Law Squared. “It’s an opportunity to begin with a clean slate and a stronger financial footing.”
Bad Debt = Missed Opportunities
Law Squared’s Chief Operating Officer, Trent Milvain, agrees: "From a financial standpoint, failing to recover debt is a significant missed opportunity. It not only impacts cash flow, but inflating the balance sheet with non-performing assets ultimately effects the performance by how a business can allocate capital.
Trent says: “Many businesses hesitate to pursue debt recovery due to concerns about legal costs, the complexity of collection, or the risk of damaging client relationships. However, delaying action often results in even greater costs down the line. Respectful early intervention, particularly with a fixed-fee, transparent approach, is a far more efficient and cost-effective way to ensure the financial health of the business."
First Step to Debt Recovery
Natalie believes an effective first step can be effective: “Sending a letter of demand on a law firm’s letterhead often prompts debtors to either pay in full or enter into an instalment arrangement.”
The earlier the action, the better though, urges Natalie. “The longer debt remains unaddressed, the more difficult it becomes to recover.” She explains that debtors’ financial situations may deteriorate, or contact may be lost entirely, making resolution even harder. “By tackling dormant debt at the start of the financial year, you're not just improving your cash flow – you're laying the foundation for better financial health throughout the year,” says Natalie.
Experienced in debt recovery and insolvency, Law Squared’s Disputes and Litigation team recently helped a client recover 55% of the total outstanding debt through targeted letters of demand sent to their current debtor’s ledger. As for the remaining balance, Law Squared are able to conduct further searches and investigations to assess the viability of pursuing legal action and advise on the commerciality of doing so – all at a fixed fee cost.
Natalie recommends business leaders take some time during the first weeks of July to review the debt they are carrying into the new year and consider how recovery might impact their path to success in the year ahead.
“Law Squared’s model is a unique and genuinely differentiated offering in the legal services market. Providing absolute certainty and transparency over scope and pricing, along with a very pragmatic, commercial approach to client issues, helps create a genuine trusted advisor relationship with the Law Squared team.”
If you’re carrying bad year’s debt into this financial year, we can help. Reach out to our Disputes + Litigation team via [email protected]