Businesses undergo many ups and downs during their transactions. The ultimate goal of any business is profits but in doing so there might be sometimes quick decisions or overlooking of long term goals which might result in great losses. This puts the reputation of a company in to jeopardy. Also the clients to which your business is linked might undergo huge financial and personal turmoil. This is because they lose a strong vendor and also good business partner. Any non-compliance of the Business to business laws may result in total loss of the fame and personal relations of the company. That’s why to ensure that the credit company gradually repays the loss and escape fraudulent activities of creditors.
Under Debt collection act, Business Debt Collection means full recovery of whole due amount from theDebtors. It is better to allot the duty of debt collection to a professional DCA ( Debt collection agent) to ensure that whole amount is recovered and both the parties are under fair relations.
Steps to be followed for recovery of bad debts are:
- The first step would be to contact the debtors and enquire with them the total amount to be recovered, whether it is in the form of cash, cheques or shares also should be determined.
- Then DCAs try to reach out to the debtors and finalise late payments. If the debtors are not reachable, then try to get them under communication.
- The motto of DCAs is to resolve all settlements without the interference of law. After pre-legal actions, court proceedings follow. Under collection laws, professional debt collection bodies can be hired and the debtors can be seized of their properties or get an agreement for debts like IVA(Individual voluntary agreement) and CVA( Company voluntary agreement). This gives assurance for the creditors that some amount be settled rather than completely becoming bankrupt.
- Creditors also have a right of sending official statutory demand letters before actually coming in to picture. These letters are like notice periods and inform the debtor that certain amount has to be paid before certain date. This gives a chance for the payable party to arrange for funds. It also gives references that if amount is not paid, court proceedings will follow.
- If the outstanding amount is not paid before the specified date then bad debt recovery proceedings start after taking over the case from the official DCA. This is done by small claim courts.
- After this, the creditors are supposed to file their defend and reveal when the dues can be paid.
There are different laws in different countries and both the parties have to oblige to them to hold a long term relationship.