It’s the nightmare of every business: unpaid invoices piling up and choking cash flow. The first instinct is often to send an army of bailiffs against these bad payers! However, there are more subtle solutions for debt collection. Negotiation remains the best way to obtain a quick repayment without upsetting the client. And if conciliation fails, the justice system has procedures in place to protect your rights without ruining the business relationship.
The formal notice, the first mandatory act for debt collection
Before any legal action, the creditor must send a formal notice to the defaulting debtor. This mandatory step allows them to prove that they attempted amicable recovery. The formal notice takes the form of a registered letter with acknowledgment of receipt, concise but firm. It reminds the debtor of the amount and origin of the debt, the payment deadline originally agreed upon, and urges the bad payer to comply within a new timeframe, usually 15 to 30 days.
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There’s no need to use a threatening tone in this first letter: the goal is to prompt a response from the debtor, not to slam the door on any amicable settlement! To ease this somewhat tedious step, more and more companies are turning to a debt collection software. With solutions like CashOnTime, it is possible to automate invoice payments. Follow-ups are conducted, reminders are sent in case of delays, and if necessary, a collection procedure is initiated. A practical solution!
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Next comes the amicable debt collection procedure
When the formal notice proves ineffective, the creditor can entrust their case to a provider specialized in amicable collection. Less costly and less confrontational than legal action, this process aims to find a negotiated solution. The amicable collector has effective levers: phone reminders, more insistent letters, meetings with the debtor…
The advantage of amicable collection? Avoid burning bridges with the client. Because behind an unpaid debt may lie a cash flow accident; the debtor is not always acting in bad faith. An amicable solution allows for the maintenance of the business relationship, provided the creditor demonstrates openness. Amicable collection is surely the most diplomatic solution in the case of non-payment. It can yield astonishing results when conducted with finesse!
Legal action, the last resort
When all other remedies have failed, it’s time to consider the court. But again, different procedures exist. The choice will depend on the amount of the debt. For small disputes, the payment order is recommended: a simple and quick procedure obtained from the local court. For larger amounts, the common law procedure must be initiated before the competent court.
If the debtor does not appear or refuses any arrangement, the case will then be judged at a hearing on the merits. The ensuing judgment finally allows the creditor to initiate certain measures: wage garnishments or bank account seizures, for example. Of course, at each stage, the debtor can still come forward and propose a repayment. This legal action remains the only possible outcome against a recalcitrant debtor.