When you should pass your delinquent accounts
over to a Debt Collector
The current economic crisis has turned the spotlight onto the issue
of ensuring timely payments from customers. Experience has shown
that six out of ten companies are paying late. There appears also to
be a correlation between the turnover and the punctuality in making
payment; the smaller the company the sooner it tends to make payment
to its suppliers. Big enterprises, on the other hand, often tend to
take their time when it comes to making payment.
Following upon the onset of the economic crisis there has been a
worsening of the late or non-payments situation. From 2007 to date,
the percentage of ‘good’ payers has fallen by about 10%.
This problem requires to be approached from two fronts: firstly,
companies have to be conscious of who they are doing business with
and that means getting
business information and
credit
checks on companies prior to closing deals or making deliveries.
In Italy, the tendency until recently has been to rely upon word of
mouth or previous trading history. This is no longer a valid method
of verifying economic or financial reliability. Since the beginning
of the crisis, companies have slowly but surely cottoned-on to the
idea that carrying out financial vetting of their customers is a
good way of separating out potential non-payers or imposing more
stringent payment terms.
If the time for checking has passed, the goods have been delivered
and the payments are not forthcoming, what is the best way to ensure
quick payment? It is essential that all contacts with the debtor are
carried out at regular intervals. It is no use issuing a reminder
letter giving 14 days to make payment, and then doing nothing futher
for 3 months. The debtor will get a measure of how serious you are
about recovery from your behaviour in this phase. It is also to be
borne in mind that statistically after 90 days debts are
significantly less easy to collect. Comas suggests that clients
should have an established procedure of 2 reminder letters issued
from the due payment date of the debt about 14 days apart. A
telephone reminder should also give the debtor the idea that you are
not going to let up. At 60 days non payment, they suggest, we are
heading towards clear non-payment. Either the debtor can, but won’t,
pay, in which case more pressure needs to be brought to bear or he
cannot pay, due to lack of funds. Both situations require the
intervention of specialist collections companies. The first reminder
issued by a debt collection firm very definitely has a psychological
effect on the debtor; he is no longer simply dealing with the
company, but is on track potentially towards debt recovery
litigation – something he will want to avoid. In the case of a
debtor who is unable to pay, we may be looking at a company which is
about to go out of business. It is very likely that there are other
debts waiting to be paid, and you want to be one of those paid,
rather than being at the end of the queue.
Comas has been operating in the
debt collection field in Italy since 1976, and integrates the
debt collection function with that of company/credit
information and private investigative activities.
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