Debt collection is a necessary process for businesses to ensure their financial resources during their operations. However, for various reasons, debt collection may be ineffective and negatively affect the interests of the business. In this article, we will analyze and present the reasons for ineffective debt collection.
1. Ineffective debt collection team
The human factor is crucial in every profession, and debt collection is no exception. When a business’s debt collection staff is equipped with the necessary skills such as legal knowledge, communication skills, negotiation experience, and other necessary skills, the business is more likely to succeed in debt collection.
Conversely, if the business’s debt collection team lacks experience in debt collection, it will be difficult to recover debts. In some cases, debt collection staff who lack legal knowledge may engage in illegal debt collection activities, causing serious damage to the business’s interests or even constituting crimes under the provisions of the Criminal Code.
2. The prolonged period of debt
Another reason for ineffective debt recovery is when businesses do not take necessary measures to recover debts when they are due, which increases the likelihood that these debts will become bad debts, and difficult to collect. Debtors tend to avoid payment when not prompted or reminded by creditors. If businesses neglect to request payment from debtors for 6 to 12 months, the likelihood of debt recovery will decrease, and if the debts have been outstanding for over 3 years, the likelihood of recovery is even lower.
Allowing debtors to delay payments also increases the risk for creditors because if debtors have too many outstanding debts, they may become unable to pay. In that case, the creditor may no longer be able to recover the debt, or it may take a lot of time, effort, or cost to do so. Moreover, if a business considers filing a lawsuit against a debtor with overdue debts, it may be too late to file within the timeframe specified in the Civil Procedure Code. In that case, the business’s rights may not be guaranteed, and even if there is a court judgment or decision, the execution phase can be very difficult and prolonged.
3. Businesses no longer keep documents to support debt recovery
A debt between businesses always arises from business activities. Therefore, to recover debts, businesses need a basis to request debtors to fulfill their payment obligations. The most important are the documents related to the debt and the contract between the creditor and debtor, such as contracts, delivery notes, invoices, and most importantly, a debt reconciliation agreement confirmed by both parties. These documents are the clearest legal basis to prove payment obligations and determine the exact amount that debtors must pay.
If a business does not store complete records leading to the loss of these important documents, debt recovery will be very difficult when there is not enough evidence to request the debtor to make payment and accurately determine the amount requested for payment. Moreover, if the business initiates legal proceedings against the debtor at authorized dispute resolution agencies but cannot provide the above documents to prove the litigation claim, it will seriously affect the interests of the business. Even the authorized agencies may not accept the claim for litigation because the business cannot submit the documents, or evidence to prove the request for debt repayment.
It can be seen that the debt recovery process is not simple and has many inherent risks when implemented. Therefore, when carrying out debt recovery activities, businesses need to carefully prepare the necessary factors. In addition, to ensure that debt recovery is carried out effectively and professionally, businesses can consider using debt recovery services from law firms. At that time, the rights and interests of the business will be guaranteed and at the same time, the ability to recover debts of the business will be improved.
Above is an article analyzing the reasons for ineffective debt recovery. Hopefully, this article will be helpful to the activities of businesses.