Debt collection is a procedure that is part of the daily life of all companies. However, many entrepreneurs (as I have witnessed during my consultancy missions in debt collection companies) do not realize the importance of this procedure for the profitability of their business.
For the arrears, let’s make a little reminder: the debt is the right that a person (or a company) has with a debtor (individual or legal entity). It is therefore nothing more than a debt that the debtor must pay, after he has received a service or the delivery of a good. A debt is, let us say, a “normal” debt because it corresponds to the time lag between the provision of a service and its payment. But it can become an unpaid debt when the time lag becomes so long that it affects the health of the supplier’s portfolio. It is at this stage that debt collection comes into play, the process of telling the debtor that it is time to pay what is owed.
Amicable debt collection to give a second chance
The first step is to make an amicable recovery in order to avoid litigation. After all, your buyer may simply have forgotten to pay his bill, or may not have considered your request as urgent. Amicable collection then consists of sending reminder letters, either simple or registered with acknowledgement of receipt.
For the most demanding clients of my former company, I didn’t hesitate to call the debtor to remind him that “he who pays his debts gets rich”. I stress that at this stage you are not yet obliged to call a debt collection company or a bailiff. You can do amicable debt collection at your own pace. And don’t forget that the longer the delay, the lower the chances of recovering your debt. Indeed, statistics estimate that there is a 75% chance of recovering your debt three months after the due date. And this figure drops to 20% one year after the due date (source here). This truthful observation has also prompted entrepreneurs to develop software that only collects debt (full details on what a bad debt provision on Leblogdudirigeant is).
Legal recovery to sue
You have done everything possible to bring the friendly settlement procedure to a successful conclusion. Unfortunately, your debtor is stubborn: you must then initiate an application at the nearest court.
Once at this stage, you can choose between three levels of pressure to force the debtor to honour his debt:
- The order for payment is the most common procedure. Spread over a period of 2 months, it has the advantage of being cheaper and does not require the intervention of a lawyer.
- The summary provision is even quicker and allows you to recover your debt with the totality of the interests for late payment. Always feasible without a lawyer, this procedure generally lasts between 15 and 30 days.
- Finally, the summons for payment is the longest procedure, often dealing with complex cases and large amounts. At this stage, you subpoena the debtor to appear in court.