Every entrepreneur has to deal with defaulters sooner or later. This is very annoying because not only does this cause you to lose extra time, but it also affects your cash flow. So what exactly is non-payment? Non-payment boils down to companies or individuals who have received an invoice but, despite reminders and a reminder, pay it late or not at all. To prevent your cash flow position from suffering, it is important to deal with defaulters in the right way. There are a number of tips and steps available for this.
Send defaulters reminders and reminders
One of the important steps when defaulting on payments is sending a reminder after the payment deadline has passed. For this, good debtor management is important, so keep a close eye on the payment deadlines. If payment is still not made despite a reminder, you can send another one and then switch to sending a reminder.
Call the defaulter
Another way to deal with a defaulter is to make personal contact. For example, do you have a long-term business relationship with a company, and have bills always been paid neatly in the past? If so, give them a call and ask why payment of the invoice has been delayed. It may be possible, for instance, to possibly agree on a payment schedule to get the amount in.
Hand the invoice over to a collection agency
There is always a risk that an invoice is not paid despite personal contact, reminders, and a reminder. Then you reach a point where you need to take other non-payment steps to still see your money back. You can work with a collection agency that will collect the debt for you. However, it also happens that the defaulters do not make payment even then.
Summoning a defaulter
If there is a persistent defaulter, legal action is needed to get the money you are entitled to be paid. You can litigate at the cantonal court without a lawyer if the claim is below EUR 25,000 and have a writ served by a bailiff. In doing so, you have the choice of drafting a summons yourself or having it done by a bailiff. If it comes to the point where you have to take legal action, it is important that you have built a file around the defaulter. For example, with the delivery agreement, invoice sent reminder, and demand letter.
A collection procedure has several steps, such as an out-of-court procedure, court proceedings, and enforcement of the judgement. After you have transferred the claim to a collection agency, for example, there is still an extrajudicial process. The collection agency first sends a collection letter with a summons to the defaulter to get the invoice paid. If this fails, the next stage is to start legal proceedings, and the bailiff may serve a summons. If the court rules in your favour, the bailiff has the option of proceeding with an attachment if the defaulter still fails to pay. For example, wage garnishment or bank garnishment.
Even with a court ruling, there is no 100% certainty that a defaulter will pay. There is always a risk that an invoice will remain outstanding. There are several ways to reduce the risk of default. For instance, you can do a credit check before entering into an agreement with a company. Depending on the type of business you have, it is also possible to ask for a down payment or work with partial invoices, for example.
Security with selling invoices
There is another way to keep defaulters out, and that is by opting for security with invoice sales. Factoring is booming, and more and more companies are switching to factoring. You benefit from several advantages in this case. Besides no longer having to deal with defaulters, it is immediately ideal for strengthening your cash flow position. In this respect, factoring can even be seen as an alternative form of financing. So if you want to eliminate the risk of non-payment, factoring is the way to go.