Credit risk management is an important element of the proper company’s operations. The process can be shown as a series of four phases:
COLLECTIONS: Recovery, which is recovering difficult debts
If, despite of the use monitoring customers’ receivables, he does not regulate their obligations, the case should proceed to the next stage, i.e. friendly collections. The aim of friendly collections is to carry out a rapid and effective process of recovery using the tools relevant to this category of claims. The entrepreneur should focus on investing funds in its own debt collections department or outsourcing it. The next step is hard collections where debt collectors use a lot more serious sanctions. Hard collections (hard recovery) applies only to the so-called, difficult debtors.
The past due receivables are every day problem all over the world. The reasons are various, from miss-management to overall macroeconomic conditions in the country. For every company, it is important to know as well the reason of past due (which will allow to define the collection strategy) as the day when the debt will be paid. In the case the customer is not willing to define the payment date, the creditor should take the appropriate steps to collect the money. This could include debt recovery litigation.
The main tools used in the collection process are following:
It is very important that every collection step is properly documented. All the documents will be than a base to prove how debtor behaved and reacted on our monitoring, and later collection actions.
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