1. How to deal with non-payments of your company?
The default are one of the worst threats to your business by generating treasury problems that require you to act with extreme diligence.
Therefore, it is vitally important deal with delinquency correctly.
In this blog, we summarize what consequences they cause and advise you on how to avoid them and/or reduce their negative impact.
2. The serious problem of non-payments in your company
Economically, the entrepreneurial process is a succession of payments and income that must leave benefits. Each charge allows new investments to be made and costs to be paid for, as long as a certain return is obtained.
Now, when the flow of income stops, the collapse can be irreversible. who have suffered unpaidThey are aware of how they disrupt everything.
First, the benefits are greatly reduced and then, having to face the same costs without money, you get losses.
In summary, these are the negative consequences derived from this situation:
- Your financial costs they increase remarkably.
- The ingresos of your company are reduced.
– you lose opportunities business due to lack of liquidity.
– Your growth is limited by the inability to invest.
- Have difficulties to pay the payroll and costs of your organization.
- The supervivencia of the business is in jeopardy.
When delinquency shoots up, you enter a default spiral very dangerous that greatly weakens your business. If this situation becomes chronic, your company will be bankrupt. In that sense, face this delinquency in a proactive and successful way is the difference between disappearing or being viable.
3. How to deal with delinquency in your company?
Managing non-payments can be a complicated task, but there are three main lines of action to combat this problem:
1. Prevent them and avoid defaults.
2. Manage defaults when they occur.
3. Find financing to face the lack of liquidity.
4. How to prevent defaults?
There are good practices that will allow you reduce the risk of defaulters and their consequences in your business
Specific:
– Keep track of your invoices. Periodically check their status, that is, which ones have been paid and which ones are still pending.
– Facilitate payments to your customers. Communicate in writing the expiration dates and the immediacy of payments. Likewise, it agrees with the clients the most appropriate means of payment.
– Request advance payments of invoices. Getting paid in advance reduces the severity of this danger and its consequences. A good practice is to request 50% in advance: this way you reduce the treasury problems half if you don't charge the rest.
– Find out about your clients and their history of defaults. Obviously, debtors are good at hiding their intentions, but if you investigate and act prudently, you are less vulnerable. It is preferable to give up on a suspicious client than to suffer a default later.
– Take out credit insurance. The key is to find an option that is affordable and profitable for your organization.
5. How to manage delinquency?
Certainly, there are not many alternatives when the company defaults They have already occurred, but we recommend that you manage outstanding debts in the following way:
– Renegotiate the debt. Agree with the debtor new partial payment terms or a reduction to encourage him to pay, if there is no other remedy.
– Arm yourself with patience and do not give up. Persevere, at least make it difficult for the other party.
– Use a collection company.
– Go to court.
As you can see, all these alternatives will cost you money, but it is always better to recover a part of the total than not to charge at all.
6. What is the best financing against defaults?
Turn to alternative financing If you are in this situation, it will offer you better conditions than traditional banking in these difficult times when evaluating the risk of the trade credit payer.
In addition, it puts at your disposal very interesting formulas to prevent and deal with delinquency.
Specifically and above all:
1. promissory note discount. It consists of 'selling' these payment documents to a financial entity in exchange for a part of the amount. The advantage is that you collect them before they expire and that, if you agree, the buyer assumes the risk of non-payment.
2. invoice advance. It is a similar procedure, but it is done with invoices pending collection. They are delivered and entered in advance thanks to whoever finances. When it is without recourse, the subsequent non-payment will not affect you or cause you treasury problems.
The conclusion is clear:
The company defaults they are a serious and very dangerous grievance, with possible irreversible consequences.
La alternative financing and proper management of delinquency they are your main antidotes.
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