In the current economic climate, even a single unpaid invoice can quickly disrupt your business, seriously undermine your cash flow and even threaten the viability of your company. For companies, Debt Collection is a strategic lever to protect themselves against late payments and insolvency. Check out our tips on how to effectively manage your receivables before they become bad debts.
Longer payment terms, more frequent delays, and growing volumes (and amounts) of unpaid invoices. In 2024, granting payment terms remains widespread practice in most countries around the world. And for good reason: B2B credit is the leading source of financing for trade. Today, 85% of companies face unpaid invoices, regardless of their size or sector. Accounting for 25% of business failures, payment defaults can have a significant impact on your cash flow, results and business development. All these factors make Debt Collection a strategic tool for protecting your business.
Automate preventive reminders
This is one of the easiest (and least expensive) measures that can be implemented quickly at all levels of your organisation. It's simple: just make it a habit. Before an invoice is due, send your client a reminder by phone or email. Sometimes, a single reminder is enough to trigger payment.
This contact is also a way to build a relationship with the buyer and anticipate any oversights on their part. Regular follow-up reminds your clients of their obligations and ensures open communication.
emphasises Joanne Jarre, Debt Collection Manager at Coface France
These follow-ups are particularly important for two reasons:
- To better understand the debtor's situation: if a debtor requests a payment extension, this may indicate that they are experiencing financial difficulties and prompt you to be more proactive in debt collection and payment monitoring.
- identify certain disputes or irritants: this gives you the opportunity, before the litigation phase, to resolve them quickly and secure payment of the debts as soon as possible.
Proactive management and extreme responsiveness: your new mantra / motto
Even in the amicable phase, swift action and responsiveness are the keys to successful Debt Collection! Because every day counts, no need to wait: as soon as an invoice is due, it is recommended to initiate a Debt Collection procedure.
Avoid relying solely on the buyer-supplier relationship of trust, as this can lead to even longer payment delays. Without compromising the commercial partnership, the aim is to be hypervigilant on this issue and anticipate unpaid invoices and payment defaults as much as possible.
advises Joanne Jarre.
Keep a close eye on your debtors
Just because your client a debtor for months or even years does not mean that he will not be able to pay you in a few days! Keep in regular contact with him. At a measured but frequent pace. Call your debtors to check on the evolution of their situation and the payment of their debts. Be understanding while remaining firm on your expectations.
Right now, the debtor may not have the required cash flow, but they may well receive payments within the same week, enabling them to settle their outstanding debt. By staying in the picture, the aim is to be the first creditor to obtain payment from the debtor as soon as the needed funds are available.
analyses Joanne Jarre.
Internal support, payment agreements: focus on solutions!
During this amicable phase, you can seek support within your company, such as involving the sales representative in charge of your debtor client, to avoid any further extension of the debt.
This can be helpful because the sales representative may have different insights into the client company and its current priorities, and can therefore assist you in identifying the right contacts responsible for supplier payments.
explains Joanne Jarre.
Alternatively, you can consider other negotiation tools:
- New order VS old debt: take advantage of new orders from your debtor to secure payment of an old debt.
- Payment agreements: offer your debtor an agreement and a payment schedule in order to find an amicable solution while securing payment.
Forget administrative phobia
Often overlooked yet crucial, documentation is the most burdensome and time-consuming part for decision-makers. Especially since a (proper) debt collection case is not just about invoices! Delivery notes, proof of service provided: all successful debt collection relies on meticulous work to ensure proper documentation.
These elements are extremely important in proving the validity of the debt and anticipating any disputes over the service provided by the debtor. In the longer term, and in the event of simplified legal proceedings for debt collection, a well-documented file is much more likely to result in the judgment being enforced more quickly.
points out Joanne Jarre.
Get it right: be formal
If he doesn't respond to your informal efforts, adopt a formal tone with your debtor. State your intention to take legal action (preferably by registered letter with receipt) in the event of non-payment of invoices within a specified period and late payment penalties.
Letters sent directly to your clients, such as a letter of formal notice, have a significant impact on the outcome of the debt collection process. These official documents remind your client of their commitments and your willingness to take legal action in the event of non-payment. If you still haven't received payment for your invoice, other options are available, such as a pre-legal notice, a payment order, summary proceedings or a summons to pay, which are generally effective.
It's essential that all contact with the debtor is formalised in writing. In commercial law, evidence can be provided by any means: even an email can be accepted in a legal debt collection case.
says Joanne Jarre.
Ultimate tip: entrust your bad debts to an expert
As you can see, internal debt collection is tedious, time-consuming, involves a lot of procedures and specificities to master... without any guarantee of success. What's more, the older the debt, the lower the chances of recovering it.
As a global leading player in trade credit risk management, our debt collection services significantly improve your chances of getting paid. Our 200 local experts and 250 legal partners collect your unpaid debts in 190 countries, prioritising amicable solutions thanks to their in-depth knowledge of local markets, legislation and payment behaviour. As an added bonus, you preserve your relationship with your customer and only pay for this service on recovered debts!
Discover our Debt Collection services and get in touch with our experts now.
