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  • Xservice Debt Collection

How To Recover Debt If You Suspect Your Debtor Is A Phoenix Company

Are you in the building and construction industry?

Are you a supplier of cafes and restaurants?

These are the most prevalent industries that face phoenixing, which usually occurs when a business has an extraordinary amount of debt. To avoid paying its debts, the owner opens a new business with similar names, transfers assets and customers to the new business, and closes the old business. Phoenixing is illegal, as it unfairly competes with other businesses. Many government departments specifically collaborate together to detect, deter, and disrupt illegal phoenix.

Things you need to know in recovering debt when face phoenix company

How to avoid phoenixing customers

Having a customer who operates as a Phoenix company can be detrimental, as it can drain your cashflow, cost your time and effort to chase them down, as well as cost you money to recover debt from them. So it is important to protect yourself at the very beginning.

1. Sign a proper trade agreement with the customers, with the director’s personal guarantee;

2. Verify their ABN record to see if it is registered and not under liquidation or external administration.

3. Doing a credit check for the customer’s company and each director;

Warning Signs

There are a few warning signs that can be watched out for to protect yourself, no matter if you are working in the company or it is one of your customers or suppliers.

  • Pricing well below the market value;

  • The company's director has previously liquidated entities;

  • The company is requesting payments to a new company, especially one with similar names.

What to do when you suspect a phoenixing customer

If it unavoidably happens that you’ve traded with a customer, and later on you suspect it is a phoenix company, then the following steps can potentially help you to reduce your loss.

1. Stop supplying them and start chasing money internally.

2. Collect evidence of phoenixing;

3. Report to the Phoenix Taskforce

4. Speak to a professional debt collection agency as early as possible.

While collecting debts from a phoenix debtor can be challenging, Xservice Debt Collection can help if it is still not too late. We are a professional debt collection agency, with active debt collectors across four different states: Victoria (Melbourne), New South Wales (Sydney), Queensland (Brisbane/Gold Coast) and Western Australia (Perth). If your client is not paying invoices, or you are simply seeking a debt recovery company to improve your cashflow, get in touch with us for an obligation-free consultation. We specialise in commercial debt recovery. No matter if you are a small business or a medium-to-large firm, we can help.


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