• MCW Lawyers

When is the Right Time to Pursue an Outstanding Debt?

Updated: May 3

All businesses, at some point in time during their operation will experience a client or customer who will refuse or fail to pay an invoice when that invoice becomes due and payable. The question many businesses ask is; when is the right time to pursue an outstanding debt, and what are the consequences of leaving a debt outstanding for too long?


Limitations Act 1969 (NSW)

The cause of action a business has against a debtor will, in most cases, be due to breach of contract. For example, a business has been approached by a customer or client to provide goods or services, the business supplies the goods or services to the customer or client and the customer or client then refuses or fails to pay for the supplied goods or services. A contract does NOT need to be in writing for it to be legally enforceable.

In cases of contractual breach, a creditor will have a period of six years from the date the cause of action first accrues, usually the date after the final day for payment of the invoice.


So; if you have six years from the date the cause of action first accrues to initiate proceedings, is there any reason why proceedings should be initiated sooner rather than later? YES.


  1. Both an individual's and a business' financial position can change dramatically over a short period of time. A key advantage you may be more familiar with the current financial circumstances of the debtor the closer to the date that the debt became due. If you wait years to collect a debt,

  2. The facts of the case and documents can be lost the further you wait.

  3. If the person is financially unable to pay their debt, it may be likely that you are not the only creditor pursuing the debtor.

  4. The debtor's contact details and place of residence may change. This is especially so if multiple creditors are pursuing the same debtor.

  5. There is an opportunity cost in not having the money available to you. Let's say you are owed $100,000.00 in unpaid invoices, and these invoices have remained unpaid for in excess of one year. If you compare the alternate reality had the debtor paid $100,000.00 on or before the invoice due date, what could you have used that money for? Expanding your business, property or other asset investment? There is a huge opportunity cost in leaving debts outstanding.

  6. It remains on the to-do list. Having a debtors list can take time away from completing other things that may help to expand your business.

If you are seeking to recover a debt or someone is making a claim against you, our Insolvency and Debt Recovery team are specialists. Our team of litigators can help you identify the issues, navigate the courts and give you the right advice, no matter on which side of the equation you find yourself. Please get in touch here or call 9589 6666.