Recovering Assets and Collecting Bad Debts
The dysfunctions in credit management and collection have a hard impact on the finances of any company because they force it to take out loans, pay interest and reduce its profit margin. In addition, the attention of executives is focused on financial matters so other interests of the company are neglected, thus aggravating the problem.
Prevention is important and so you must be careful when granting credits to your clients. This is essential in order to prevent non-compliance. The most efficient way to organize the recovery of financial assets is to manage the early default, which consists of a series of actions by a third party that specializes in collecting delinquent debtors. The vast majority of credits are collected out of court thanks to the collection organization and persistence in the recovery effort.
There are certain things that you should consider and for that reason is why you should have answers to some of the questions below:
What are the requirements to grant credit for a certain amount and period?
What are the measures that will be taken internally to prevent non-compliance?
What is the tolerance period for internal management?
What is the period to send the client to collection management?
Generally, the tolerance period is equal to the credit period, 30 days, after which the client passes to external management. Granting longer terms increases debt and makes recovery more difficult.
It is not something new that there are bad debts because each year banks, public services and all kinds of companies have millions of dollars in losses for this type of debt. In general, this type of bad debt is due to the inability of the debtor to meet this expense, either because they have become financially insolvent, have lost their job or have simply refused to pay the debt due to a bad experience; possibly with the entity that has offered you the service.
The most complicated thing in this situation as it relates to bad debts is usually to locate the debtor, since their address information or account numbers, for example, may not be up to date. Changing the phone number or simply not answering calls is another common impediment that makes it almost impossible to contact the person who owes money. However, collecting debts from bad debts is not impossible, if you deal with a company that handles it on your behalf. You would need a company that specializes in this type of work of recovering your debt and assets. You need to deal with a company that will start working on your behalf immediately.
If the negotiation channel has not been satisfactory or it has simply not been possible to contact the debtor once the debt has been notified, it may be claimed through the courts. There are different methods or steps to follow to collect a debt judicially. However, you need the right representation and a good intermediary such as Prudence Insurance Brokers LLC.