Guide on How to Manage Default
Giving credit to your customers is one of the best ways to grow your business. However, we are living in hard economic times that are characterized with poor performance of businesses. Most entrepreneurs are finding it hard to meet their financial obligations because of poor performance of businesses. There are an ever increasing number of businesses that are chasing a few customers. In other cases, some people just have the character of not paying loans. Its good to learn what a creditor should do in case of default.
Visit the Customer’s Business
The first thing to do when your debtors fail to pay meet their obligation is to visit their place of residence and business. Just go and talk to them to understand the reasons behind the missing payments. You can only act once you understand why the debt has not been paid. This will also inform the debtor that you are committed to chasing the debt. Make sure you remain calm and talk to the debtor about the performance of the business and how his or her family is doing. Let him provide an explanation of why the arrears are there and what is his plan to pay. This will help you understand whether you are dealing with genuine debt of its just the wrong character. You can use the information you collect to come up with a payment date that will be appropriate for both of you. Remember its always good to agree because you cannot force a payment especially where the debtor lacks the ability to pay.
Reschedule the Payments
Once your visit the debtor, one of the goals is to re-schedule that payments. Do away with the old payment agreement especially when the debtor is not in a position to abide by it. Try to evaluate the borrower’s ability to pay and come up with a schedule that will not have adverse effects on your business. The most important thing is to make sure that the debtor is comfortable and your business is not also facing cashflow issues.
Employ the Services of a Debt Collector
There are times when you will try your level best to collect the debt but nothing is forthcoming. One thing you should never try is using force or threats in debt recovery. Some clients will pay settle all their debts once they discover that the file is with debt collectors. Most people fear these professionals and hence will not want to have any confrontations with them. Debt collectors are also highly experienced and they know the right button to press especially when dealing with stubborn clients. Some people just want debt collectors to be able to settle their debts.
Conduct a Lawyer and GO to Court
When the situation gets out of hand, you can conduct your corporate lawyer for advice. These professionals will go through the agreement you had with the debtor and advice you accordingly. One legal avenue could be doing a demand letter or even going to court. Lawyers will make sure that you operate within the legal boundaries as you pursue your debt.