BAD DEBT COLLECTION
The longer a debt remains unpaid, the greater
the chance that it will never be paid.
The first step in debt management is to establish at which point an account is no longer classified as being with Credit Control, due to the time and effort required pursuing individual debtors. The primary period for standard collection is 0 - 60 days, 60 days being extreme.
With a company trading at 7.5% profit, with an account overdue for 60 days, c.50% of 'bottom line' profit is eroded.
If payment has not been received by 70 days it is suggested that you take debt management action. By the 60th day Credit Control will have allowed the customer a maximum of two 'cheque runs' or similar allowances. Credit Control, in the period of 60 - 70 days overdue, would escalate the situation to a position where the customer would either pay the account, agree payment arrangements or ensure the customer is in no doubt as to the further action and cost about to fall upon them. Depending of the size of the debt, a director of the debtor should be contacted immediately by a senior member of your company in an attempt to resolve the problem without further delay or cost. Ensure you have a strategy that provides options to litigation. If control is the significant part of credit control, management is the significant part of debt management.
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