As will be emphasized many times in this article, preferably as soon as possible, recovery can generally begin on the day after the due date. In realities, where permission to extend the payment deadline is common, it is rare to start debt collection so early. However, it is worth knowing that the creditor has such a right and it is advisable that he use it as often as possible. Hiring the debt collection agency happens to be the best option in this.
The First Stage
At the first stage of debt recovery, it is obviously not about going to court, as entrepreneurs often mistakenly believe. It is enough to try to solve the problem amicably, i.e. to start soft recovery. You can even just call the debtor to find out the reasons for the delay in payment. Often, at this stage, the creditor is able to know if the debtor actually has reasons why he has not repaid the liability on time or simply avoids payment and uses various types of excuses (see: text on the most popular excuses of debtors). A clear signal indicating that you should not wait with the start of debt collection is also the situation in which the debtor does not answer the phone from us or replies to e-mails.
The actions that we will take towards the debtor at the amicable stage may be useful evidence for us, should the case be referred to a court.
- First of all, because we are probably not the only creditors of a given debtor. While we are sitting and calmly waiting for the debtor to come to his senses and voluntarily pay off the obligation, other creditors may be active. It is easy to guess who the debtor will pay off first … And when he pays off, he may not have enough money for our company’s debt.
- In addition, numbers and statistics also speak for the quick start of recovery. Studies show that the chances of recovering money are greatest within the first 90 days of the date on which the debt became due.
- Almost 90% of debts whose enforcement was started in the first month after the payment deadline have been successfully recovered. After a year it’s just under 10%. Such a decrease in effectiveness is hard to ignore.
- It is also worth being aware that liquefaction of assets is still common practice among debtors. By delaying the start of recovery, we give the debtor time to get rid of the property.
What’s more, entrepreneurs who postpone debt collection and do not respond to payment delays, indirectly sponsor the actions of an unreliable contractor and give consent to this type of behavior. For the debtor, this is a very comfortable situation, but we set a bad example and spread undesirable market practices. In such a situation, the debtor simply obtains free credit at our expense. Thanks to our money, it can pay its liabilities to other companies … and we care about recovering our own money.
In addition, if the case went to court, getting the debt started early enough is a chance for us to obtain a favorable judgment. This is even because there is a much greater chance that witnesses will remember what happened two months ago than what happened two years ago. For us, the matter will also be fresher and we will be able to better argue and document our arguments.
If, however, we do not decide to undertake debt collection activities and we want to “get rid of” the problem as soon as possible – we can always try to sell the debt. Such decisions should also be made quickly enough. As a rule, companies dealing in purchase of receivables are interested only in new receivables, which promise recovery. We will receive the largest payment for such debts, although of course it will never be 100% of the value of the debt.