Bad debts greatly affect the company’s financial resources. These debts can be in form of the payment that the purchasing partner does not make in due course, or the money to perform the service under the contract, etc., and when the partner refuses to make the payment, it will cause the company’s cash flow to be in deficit, which even directly affects the company’s business strategy. Therefore, the debt collection service is a solution to solve the above problem.
1. Reasons why many companies cannot resolve bad debts – debt collection by themselves
In fact, many companies encounter the bad debts situation but fail to solve this problem due to the lack of experience and professional debt collection methods. Some “traditional” debt collection methods are: Making a written request to debtors for payment; sending an employee or an accountant to negotiate and request payment on behalf of the company; Requesting the competent authority to resolve the problem, etc.
In general, without professional skills, the debt collection’s results are rather unsatisfactory, leading to the prolonged debts because:
- Unprofessional debt handling staff
- Lack of skills to prepare and complete debt collection documents in favor of companies
- Debt collectors do not have experience in communicating, handling and negotiating with debtors
- Lack of legal understanding and understandings of regulations in debt collection to acknowledge and secure the company’s rights.
2. What is the debt collection service?
The debt collection service means a service where a third party takes on requesting the debtor to pay the creditor for due/overdue amounts and other assets under the signed contract or upon the agreement between the creditor and the debtor or under a decision of a competent State agency.
Debts may inevitably arise in the course of business operations of each company. In fact, when having outstanding debts, companies have to carry out the procedures through arbitration and court, which take a long time and high costs. Only 36% of the cases are received, which is rather low based on the total number of cases. Moreover, even if the effective judgment is issued, the execution in reality is rather challenging, etc. Therefore, the debt collection service is often used by many companies and individuals thanks to its convenience, efficiency and reasonable cost.
3. Debt collection stages
a) Debt collection via negotiation
It is a form of debt collection by influencing debtors psychologically and emotionally but still ensures a good relationship with customers at the same time.
This is the first step of debt collection, whereby companies rely on the contract/agreement terms signed between the parties to force the debtor to fulfill the debt repayment obligation. Negotiation is primarily proceeded by the company employees, accounting or corporate legal departments. If such negotiation is not effective, company can use the debt collection services provided by law firms.
b) Debt collection via dispute settlement agencies
In case the debtor is not willing to pay the debt, companies may base on the content of the contract/agreement to select an appropriate dispute settlement agency. Dispute settlement agencies include: Courts and Commercial Arbitration.
The settlement at a dispute settlement agency often comes with costs in accordance with the law and requires careful preparation of records, documents and evidence to prove that the companies’ claim is grounded. In addition, depending on the complexity of the debt-related transaction, the time for debt collection may vary from a few months to many years.
While debt collection through dispute resolution agencies can be costly and time consuming, it is guaranteed by state authority. If the judgment takes into effect, it will force the debtor to make the payment. If the debtor is uncooperative, the competent judgment enforcement agency will use the state power to take appropriate legal measures to force the debtor to pay the debt, even to coerce or freeze the debtor’s assets and accounts to force the debtor to perform their obligation.
Debt collection is very important, not only to ensure the financial health and profits of organizations, individuals, and companies, but also to determine the survival of the business. After the economy has just gone through a difficult time due to the prolonged impact of the Covid pandemic, the debt collection matter becomes more urgent for companies and individuals when the cash flow is becoming exhausted and can even cause the companies to go bankrupt. Therefore, the debt collection service is now an extremely important and necessary solution to solve the debt problem.
Above is an analysis article about the debt collection service of TNTP, hope this article is useful to readers.