November 1, 2024
When a business partner is in serious payment difficulties and you have exhausted all other options, it’s time to act decisively and, above all, quickly. First come, first served. Insolvency proceedings take a long time and yield small proceeds. And that’s only if the costs of the insolvency procedure do not eat up the entire bankruptcy estate beforehand.
That’s why it’s a good idea to have a contingency plan in place in case of default and to stick to it. In practice, it works well to have the back office take over the communication and collection with the business partner at this stage.
Roughly speaking, the procedures are divided into pre-litigation and litigation recovery.
Pre-judicial recovery involves assessing the customer’s repayment options, making arrangements and repayment plans and monitoring adherence to the agreements. To use a sporting analogy, this is a yellow card.
If the customer does not stick to the agreement, we move immediately to the collateral realisation phase and court proceedings, including foreclosure. That is our red card. The exact process and timeline depends on the type of collateral and local legislation.
Do you have a “contingency plan” in place to deal with customer defaults? Not yet?! It’s high time we drew it up together!
