Business relationships depend on human relationships. They require communication, patience, common sense, and knowing how to conduct oneself. No business is capable of subsisting on its own and depends on suppliers, customers, and buyers. However, in this chain, not everyone interprets its role well, which causes debts and defaults.
The default is an indebtedness that occurs when a natural or legal person does not fulfill its obligation to satisfy a payment in a period based on established conditions. This individual or organization is commonly known as a defaulter. To be recognized as a defaulter, a document must be established that is legally recognized by both parties where the debtor is obliged to make payments. Common agreements include credit agreements, telephone service contracts, mortgage deeds, etc.
Many companies resort to giving generic answers for all the defaults. This can cause a slowdown of the processes, and bad practices can lead to uncomfortable and irreversible situations. Therefore, we must bear in mind these fundamental principles:
- Every default is different. It should address issues such as the customer, the sector, the age of the debt, etc.
- Any non-payment carries information that may be useful for the future of the company. How we handle the defaulter will determine the financial situation tomorrow.
- We must remember that the objective is not to collect the debt as to collect it effectively. That is, do it in the shortest time and with the least cost.
- To keep in mind that the legitimate right to collect the debt must not clash with the fundamental and basic rights of the debtor.
There are multiple types of payments, as many as customers, but the vast majority could be classified into five large groups. Here are the characteristics of each group and the most appropriate way to handle them:
Impact technical: is one that occurs as a result of a technical error, either in the payment channel, data, and order information or a change in the company that invoices. This implies that the debtor knows the debt and is willing to pay it, but that error asks for it. The lack of bank loyalty caused by the economic crisis and the emergence of different forms of online payment have generalized this type of default.
The best form of action is to inform the debtor that the default has occurred. Notification of attempted recovery by any means of communication could jeopardize the relationship between the company and the client.
Immerse: it is a consequence of a commercial disagreement. There is no reception of the product, or it is defective, poorly invoiced, etc. In principle, if it is not an alibi, the debtor has the funds to face the debt.
The most advisable measure is to suspend all activities related to the current payment until the resolution of the conflict. Likewise, it is not advisable to classify the client as delinquent or to the process as unpaid, but as a pending dispute. This will avoid damaging the relations with the client and the performance of the recovery department.
Temporary or definite specific insolvency: this non-payment occurs when the debtor, in agreement with the products and services received and aware of the date of payment, goes through an economic and financial situation that prevents him from facing the debt temporarily or definitively.
The way of action is the collection of the debt, either through an internal recovery department or an external company, always trying to cause the least possible damage and minimum costs. For this, it is convenient to find out as soon as possible the opportunities of future payment, to individualize each case according to the characteristics of the client. If it is considered convenient, discounts can be applied in time and form that allow payment. First of all, it is necessary to weigh the cost of the recovery and resort to the legal aspect as a last resort.
Global Insolvency: serves the same reasons as the previous type of default, but in this case, it is determined by a higher instance that has to provide funds and release the payment, or by the socio-economic situation of the sector or country. This occurs mainly in the Public Sector, whose release of funds depends on higher instances.
In this case, the best measure is prevention. It is convenient to choose the clients well. In addition to the recovery, other measures such as factoring can alleviate the consequences of the debt. Likewise, it is possible to resort to claims of interest for late payment.
Fraud or fraud: It is conscious concealment of information by the debtor. He is fully aware of his insolvency and the default he causes.
Here there are only two ways of acting. On the one hand, prevention, by previously informing about everything related to the client, and on the other, judicial or criminal course of action, once the default has been committed. It is important to weigh the economic and image or reputational costs involved in opening a legal process.
There are many ways to deal with defaults and debt collections. The main course of action is prevention. All the necessary information must be collected before undertaking commercial and economic relations with a client. If a default occurs, the most important thing is good communication to preserve that relationship and the reputation of the company. Of course, respect and follow all legal avenues available.
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