Optimizing the collection of unpaid invoices: A single prerequisite, an effective litigation approach
Anticipating the worst situations allows to think, to anticipate and above all to act with the greatest efficiency. According to the latest study carried out by the Plum Institute, more than 8% of invoices issued by companies in France are never paid or are paid so late that they are considered as “losses”. Thus, the collection of unpaid debts is a problem that must be integrated into the management of your customer accounting with an approach, processes and specific practices in credit management. Faced with unsuccessful reminders from the sales team and amicable collection negotiations, the credit manager, the management controller or the collection officer must be able to make the “right decisions” and implement the most efficient contentious collection techniques for managing unpaid debts of over 90 days. A software solution of management of the customer account like ELOFICASH of COVLINE is essential to have an effective contentious approach and to recover the sums due by bad paying customers, and this, thanks to certain commercial information.
Take the “good decisions”
One cannot say it enough, it is necessary to react as soon as possible to a delay of payment. Indeed, the lower the success rate of collecting an amount due, the older the debt becomes – from 5% to more than 360 days. A software solution such as ELOFICASH contributes to optimize the monitoring of the aged balance, automates the reminders, alerts and allows the sending of a letter of formal notice to pay (via registered mail) or even an order to pay. If the reminders remain unanswered and/or the reasons for non-payment are unclear, the credit manager, the creditor or the debt collector must decide what action to take: to give up, to entrust to a collection specialist or to initiate legal collection procedures. At the heart of a contentious approach, formalized by the company, it is a question of evaluating, according to the type and the “out of time” of the debt due, the cost and the success rate, or even the possible indemnities and expenses – late payment penalties and late payment damages, according to different scenarios.
Path: The order to pay on a “CERFA printout” can be done directly by the company and represents an important psychological lever for collection.
Outsource to a collection specialist
Outsourcing to a “contracted” specialist or a collection agency greatly improves the chances of recovering unpaid debts, while preserving the commercial relationship. The ownership of the debt is transferred to a “third party” for a given time. This method makes it possible to unblock a situation, a commercial negotiation or even to set up a payment schedule, the preferred solution of a collection company. The ELOFICASH solution allows, via computerized exchanges, to follow the actions of its external service provider, to evaluate the “compromise” and even to identify the risks of insolvency in order to offer a healthy financial management.
Tip: Outsourcing the collection procedure is particularly interesting in the case of foreign debtors, due to the local environment, legal services and regulations.
Prepare and manage legal actions
After sending a summons for payment, the last resort is to initiate legal proceedings. A software solution, based on a defined workflow, helps you prepare litigation files and manage legal actions, depending on the procedures and jurisdictions involved. In addition to centralizing the elements of proof (estimate, purchase order, invoice) of the service provided, the solution can plan deadlines for producing and sending documents, which are extremely formalized, according to the legal procedures for enforcement.
Point of vigilance: The reactivity and processes of a jurisdiction vary according to your geographical area. Longer processing times and hearings, vacant positions that have not been replaced, congestion in the courts (generally at the commercial court) or in front of the bailiffs are regularly in the news.
If the claim has to be written off, especially in case of judicial liquidation or insurmountable difficulties of the customer(s), the ELOFICASH solution will assist you. Depending on the type of receivable and the scenario of customer recovery set up, ELOFICASH can prepare the provisioning of losses and profits at regular intervals. In conclusion, the receivables written off should not represent more than 3% of your receivables, otherwise corrective solutions are needed quickly!