Unpaid invoices? A practical guide to debt recovery in WA against customers and guarantors
Updated: Oct 6
financial accounts, notebook, calculator and laptop on office desk
For a small or medium business, a few large debts can be the difference between a healthy month and a cash-flow crisis.
With many businesses under pressure from ATO debt collection and rising costs, customers who are slow to pay today may be insolvent tomorrow.
The businesses that trade well are those that act early, follow a clear process, and have the right paperwork in place before working with a customer. This guide explains the practical steps for recovering a debt in Western Australia, including what to do when the customer cannot pay and you need to turn to a guarantor.
Before you chase: get your paperwork in order
A debt claim is only as strong as the documents behind it. Before you send a demand, gather:
signed credit application or contract, the quote, the purchase order;
your terms and conditions, and evidence the customer agreed to them (see our article on the battle of the forms);
invoices, delivery dockets, signed job sheets and statements;
emails or messages where the customer acknowledged the work or the debt; and
any guarantee signed by a director or other person.
Check exactly who your customer is. Invoicing "ABC Plumbing Perth" may not be the same as invoicing ABC Plumbing Pty Ltd, or John Smith as trustee of the Smith Family Trust trading as ABC Plumbing. Suing the wrong party wastes time and money. A quick ABN or ASIC search can confirm the correct legal entity.
Also check your terms for interest on late payment and the recovery of collection costs. If they are there, include them in your claim.
If you carry out construction work, or supply related goods or services under a contract made on or after 1 August 2022, you may have a faster recovery pathway under the Building and Construction Industry (Security of Payment) Act 2021 (WA). The legislation gives you a statutory right to progress payments, a fast-track adjudication process and, in some cases, the right to suspend work for non-payment. Strict requirements apply.
Finally, keep an eye on time. In Western Australia, a claim for a debt under a contract generally must be started within six years of the date the debt became due, under the Limitation Act 2005 (WA). But waiting is rarely a good strategy. The older the debt, the harder it is to recover.
The steps to recover unpaid invoices
Follow up early. Send a polite reminder as soon as an invoice is overdue, then a firmer one. Many debts are paid once the customer realises you are watching. Pick up the phone, too. It often reveals whether the problem is a dispute, a cash-flow issue or something worse.
Send a letter of demand. If reminders fail, a formal letter of demand sets out the amount owed, why it is owed, a deadline for payment (commonly 7 to 14 days), and what you will do if it is not paid. A demand on a lawyer's letterhead is often enough to prompt payment. Consider issuing a demand against the customer as well as the guarantors (if any).
Consider a payment plan. If the customer genuinely cannot pay in one go, a written payment arrangement may get you more, faster, than court. Make sure it includes what happens if a payment is missed, and consider asking for a director's guarantee as part of the deal. Be aware that agreeing to a payment plan can later be used as evidence that you suspected the customer was insolvent. If the customer goes into liquidation within six months, payments under the plan may be challenged as unfair preferences, and that evidence can weaken your good faith defence.
Start court proceedings. If the debt is still unpaid, you may need to issue a claim. In Western Australia, the court depends on the amount owed:
Amount owed | Court and procedure |
Up to $10,000 | Magistrates Court, minor case claim (informal; lawyers generally cannot appear) |
Up to $75,000 | Magistrates Court, general procedure claim |
Up to $750,000 | District Court of WA |
Over $750,000 | Supreme Court of WA |
Note that for claims of $10,000 or less brought as a general procedure claim, you will usually have to bear your own legal costs even if you win.
Enforce the judgment. A judgment is a piece of paper until it is paid. If the debtor still does not pay, enforcement options include examining the debtor about their finances, seizing and selling property, garnishing wages or bank accounts, and registering the judgment against land. For larger debts, a statutory demand or bankruptcy notice may be more effective (see below).
Statutory demands and bankruptcy notices
For larger debts, insolvency tools can be powerful levers, but they must be used carefully.
Statutory demand (companies). If a company owes you at least $4,000 and the debt is due and payable, you can serve a statutory demand under the Corporations Act 2001 (Cth). The company has 21 days to pay, reach an agreement, or apply to court to set the demand aside. If it does nothing, it is presumed insolvent, and you can apply to have it wound up, generally within three months after the 21 days expire.
A statutory demand is not an appropriate tool to use where there is a genuine dispute about the debt, or an offsetting claim. Serving one in those circumstances can lead to the demand being set aside and a costs order against you.
Bankruptcy notice (individuals). If your debtor is an individual, such as a sole trader or a guarantor, and you hold a court judgment for at least $10,000, you can apply for a bankruptcy notice. If the debtor does not pay or come to an arrangement in time, you may be able to apply to make them bankrupt.
Both of these are serious steps, and have very strict, technical requirements. Errors in the paperwork can make a demand or notice invalid. Get legal advice before you use them, and think about whether winding up or bankruptcy will actually get you paid. As an unsecured creditor, you may receive little or nothing, which is why security and guarantees matter so much.
Debt recovery against guarantors
When your customer is a company, the company may have few assets of its own. It may even have gone into liquidation. A personal guarantee from a director, or another person, gives you a second pocket to recover from. If the company cannot or will not pay, you can pursue the guarantor personally, including through a bankruptcy notice once you have a judgment.
However, a guarantee is only as good as the document and the paperwork behind it. We regularly see businesses discover, at the worst possible moment, that their guarantee cannot be enforced.
Make sure the guarantee is properly drafted and signed
In Western Australia, a guarantee generally must be in writing and signed by the guarantor to be enforceable.
Common problems include:
the guarantee section of the credit application was left blank or never signed;
the director signed only "for and on behalf of" the company, so there is no personal signature as guarantor;
the guarantor's name is wrong, incomplete or illegible;
the form contemplated two guarantors but only one signed, which, depending on the drafting, may mean neither is bound; and
the signature was not witnessed when the document required it.
TIP: Check every credit application when it comes in, not when the debt goes bad. A missing signature is easy to fix while the relationship is friendly, and almost impossible afterwards.
A one-line guarantee at the bottom of a credit application is better than nothing, but it may not do the job because there are many ways in which a guarantor may be discharged at law. A well-drafted guarantee should:
be a continuing guarantee covering all present and future amounts owed, not just the first order;
include an indemnity, so the guarantor remains liable even if the customer's obligation turns out to be unenforceable;
cover interest and recovery costs;
make multiple guarantors jointly and severally liable;
continue despite changes such as extra time to pay, changes to credit limits, or the guarantor ceasing to be a director;
include a charging clause over the guarantor's property, which may allow you to lodge a caveat over land they own;
grant you a security interest over the guarantor's personal property, so it can be registered on the Personal Property Securities Register (PPSR); and
preserve the guarantor's liability if a payment you received is later clawed back by a liquidator as an unfair preference.
Courts will also look carefully at how guarantees are obtained. Where the guarantor is a spouse or family member who is not involved in the business, or does not understand what they are signing, the guarantee may be at risk of being set aside. Encouraging guarantors to get independent legal advice is good practice.
Hold the guarantor's date of birth if you want to register on the PPSR
Many businesses want to register a security interest against a guarantor on the PPSR, often called registering a "PPS charge". This puts other creditors on notice and can protect your position if the guarantor becomes bankrupt. You can only register if the signed guarantee grants you a security interest over the guarantor's property. A guarantee on its own is not enough.
To register against an individual, the PPSR requires the guarantor's family name, given names and date of birth. Those details must come from the correct identity document, which for most people is their current Australian driver's licence. Using details from the wrong document can make the registration ineffective. This is where many businesses come unstuck. Without the guarantor's date of birth, you cannot register at all. With the wrong date of birth, or a name that does not match their licence ("Bob" instead of "Robert James"), the registration may be seriously misleading and ineffective under the Personal Property Securities Act 2009 (Cth). An ineffective registration can mean your security interest is lost if the guarantor goes bankrupt, leaving you as an unsecured creditor.
TIPS: In practice, this means:
your credit application and guarantee should ask for each guarantor's full name and date of birth, exactly as shown on their driver's licence;
take a copy of the guarantor's driver's licence when they sign, and check the details match;
register promptly, as delays can affect your priority and your protection in insolvency;
do not include tax file numbers, Medicare numbers or other personal identifiers in the registration; and
get advice on how to describe the collateral, particularly where the guarantor's property is held for personal or household use.
It is far easier to collect these details at the start of the relationship than to chase a guarantor for their date of birth once the debt is overdue.
Prevention is cheaper than recovery
The best debt recovery work happens before the first invoice is issued. A few steps make a big difference:
Use a proper credit application. Collect the customer's correct legal name, ACN or ABN, trustee details if a trust is involved, and a signed personal guarantee with each guarantor's date of birth and licence details.
Make sure your terms and conditions apply. Have them signed up front, and watch out for customer purchase orders that try to replace them.
Include retention of title and register it. A retention of title clause lets you reclaim unpaid goods, but against third parties and in insolvency it generally only works if registered correctly on the PPSR.
Set clear payment terms. Include interest on overdue amounts and the right to recover collection costs.
Keep good records. Signed delivery dockets, job sheets and written variations make disputes far easier to win.
Review your documents regularly. Credit applications and guarantees drafted years ago may no longer reflect the law or how your business operates.
How M6:8 Legal can help
Whether you are chasing a single overdue invoice or a customer who has gone quiet owing tens of thousands, acting early gives you the best chance of getting paid.
The lawyers at M6:8 Legal help Perth businesses with letters of demand, Magistrates and District Court claims, statutory demands, bankruptcy notices, enforcing guarantees, and PPSR registrations. We also draft credit applications, guarantees and terms and conditions that protect you before a debt arises. We are based in Myaree and act for businesses across Perth and Western Australia.
Call us on (08) 9316 8363 or email admin@m68legal.com.au to talk about your unpaid invoices.
This article contains general information only and is not legal advice. Thresholds and court limits are current as at October 2026 and may change. You should obtain advice specific to your circumstances before acting.
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