Collecting a trade receivable is an approach that can be managed internally or be delegated to an external service provider. In both cases, the procedure remains the same but it often takes time and effort to be carried out properly. Following up on unpaid bills can be a daunting task for managers. The post will tell you how you can go about it.
Here are the different stages of commercial debt collection.
First of all, be aware that collecting a commercial debt is a process governed by law. You have the full right to collect unpaid bills from a customer that does not honor an invoice and if the contractual agreement of this sale has been clearly defined. There are several types of claims including civil claims for individuals, tax claims for taxes and commercial claims for businesses. The debt collection process takes place in several stages and does not start until the invoice payment date has passed and generally, after several unpaid bills reminders.
Important points to remember
Before talking about commercial debt collection, we must look at the transactional part. In addition to the payment deadline mentioned on the invoice, each sale or provision of services must outline general conditions of sale (GTC). These allow the creditor to clearly specify the financial terms of the transaction. In the T & Cs, there are generally specific clauses that encourage the debtor to quickly pay his invoice. For example, it may be penalty clauses in the event of non-payment, discount clauses for early payment or even references to penalties for delayed payments or nonpayments. Some companies also add the obligation to pay application fees to cover the costs of debt collection.
However, it is important to note that collecting a commercial debt will only be possible if the T & Cs have been signed by the customer. Other documents or proofs that are also essential to the procedure includes an order form, a delivery note, an invoice, etc. The RCS number of the debtor must be included on each written proof.
Different stages of commercial debt collection
1- Amicable recovery
After several reminders for unpaid debts, the creditor can initiate an amicable recovery procedure. No external intervention is needed during this first phase. In fact, it is the creditor himself (or the mandated company) responsible for recovering the payment from the debtor. This procedure is done by registered mail and the letter mentions the amount on the invoice, the payment due date and any penalties.
2- Judicial recovery
Should the first steps prove to be unsuccessful, the creditor can now involve the courts in the commercial debt recovery. The process is done in 3 stages:
- Lawyers intervention which lasts approximately 2 months
- The summary provision which is of an even faster duration of 15 days and always without a lawyer
- The warrant, which is the longest and most complex procedure. This is used when large sums are committed.
The court may use different means to recover the money such as the seizure of the debtor’s bank accounts, real estate properties etc.
In conclusion, debt collection is an important activity because it can affect the survival of a business. The post has highlighted different options that an entrepreneur can use when recovering debts. This first step is always the best because it’s between the two partners and they can reach an amicable resolution.
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