What is recovery management?

Collection management is the process of recovering unpaid debts or unsettled claims. The process may include activities such as communicating with debtors to remind late payments, using demand procedures, negotiating repayment plans, and taking legal action to collect unpaid debts.

Recovery management process

Prevention

Outstandings are best avoided by having proper credit procedures in place and exercising due diligence when selling or providing services.

Identification

Unpaid debts must then be identified as soon as they arise, establishing effective monitoring and recording procedures.

Reminder

The debtors should then be contacted quickly to obtain payment, using letters of formal notice or telephone calls.

Negociation

Once the debtors are contacted, a discussion stage occurs in order to find a repayment solution that suits all parties.

Judicial remedy

If the previous steps fail, legal action may be taken to recover the debt.

Recovery

Finally, in the event that all options fail, businesses have the option of seising assets or placing liens on bank accounts.

In what situation should you use a recovery management approach?

Customers’ outstandings

When a customer does not pay their invoices on time, a company can initiate collection proceedings to get the money back.

Uncertain debts

If there is doubt about a customer’s ability to repay a debt, a company may use a recovery procedure to assess the situation and recover the money owed.

Comercial litigation

During a dispute between a company and a customer, a recovery procedure is possible in order to resolve the dispute and recover the money.

Bankruptcy

When a business goes bankrupt, creditors may start collection proceedings to get as much money as possible.

Preserve cash flow

Some companies with financial difficulty undertake a recovery process to preserve their cash flow and thus avoid bankruptcy.

How to handle a good recovery management?

Implement effective credit procedures

In order to avoid outstandings, it is imperative to have appropriate credit procedures in place and to exercise due diligence when selling or providing services.

Identify unpaid debts

Unpaid debts should be identified as soon as they occur, establishing effective monitoring and recording procedures.

Contact debtors quickly

It is important to contact debtors quickly in order to obtain payment, for example using letters of formal notice or telephone calls.

Negociate

We must ensure that we obtain time to discuss with the debtors to find an appropriate repayment solution for each party.

Respect the law

To avoid legal action, compliance with laws and regulations is fundamental.

Use payment tracking tools

By using payment tracking tools, a company avoids certain errors and can track payments and therefore any unpaid debts.

Solicit recovery companies

It is possible to use recovery companies for companies that do not want to manage recovery procedures themselves. However, you must be careful to ask for qualified professionals.

Be proactive in preventing outstandings

It is important to be proactive in preventing unpaid debts by using tools such as bank guarantees, credit guarantees and payment guarantees.