The most effective way to collect unpaid debts without complicating life

Debt collectionToday, it is becoming an arduous task for many companies or freelancers. More and more banks, utilities and other companies are incurring millions of euros in losses due to this type of problem. 

One step higher are even the so-called bad debts. This type of debt arises due to the debtor's inability to meet a certain expense, either because he has become financially insolvent, has lost his job or has refused to pay the debt for a specific reason. 

On many occasions, have uncollected debts The company's business processes may be slowed down or even cause uncertainty as to its near future. At the most radical extreme, the defaulted debts jeopardize the company's own economic viability.

Is it possible to collect bad debts?

Collect debts from delinquent customers is possible, but it is not simple. Although it may seem an easy and affordable process, we often find that this is not the case. That is why it is advisable to seek the intervention and help of professionals to carry out the appropriate steps and, as far as possible, collect these debts or, at least, part of them.

The main problem is usually locate the debtor. Their bank or address information may have been changed or may not have been updated, making it more difficult to contact them. Likewise, it is also very common that they do not answer calls, as they have cancelled their usual telephone number or have left it unused. This makes communication even more difficult for reach an amicable agreement, before making a legal claim.

How to collect a debt?

All debts have a specific period of time until they are considered time-barred. Therefore, as long as that date has not yet arrived, the age of the debt will not matterso we would be able to collect in any case. 

Generally, the deadlines for collecting debts are established in accordance with state law and usually begin to run from the moment the debtor defaults on the payment due.

 In the event that the debtor does not show signs of intent to pay the debt and is not expected to pay the debt, may be claimed through the courts. There are different methods to collect a debt judicially:

1. The simplest and most effective is usually the monitoriowhich does not require the services of a lawyer. This route has no limit as to the amount of the debt to be claimed, but, in exchange, it requires the debt collector to provide documents that justify the debt, as is logical. Once the documentation has been provided, the judge will assess it and, if it accepts it, it will grant a period of 20 days for the debtor to respond, either by paying the claimed debt or by submitting an allegation. 
2. Another common procedure is the declarative verbal. The amount of the debt, in this case, must not exceed 6,000 euros. In case it exceeds it, it will be necessary to bet on a ordinary declaratory proceedings. And, in either case, if the amount to be claimed exceeds 2,000 euros, it will be necessary to have a lawyer and a solicitor.
3. The call exchange procedure will be used when the debt is reflected on a check, promissory note or similar. Once the authenticity of said document is corroborated, the order will be given directly to the assets of the person who owes the money or, in the event that this is not carried out within 10 days from the date the request for payment is made, the court will determine on which asset the payment will be executed.

What is Factoring

The factoring is one of the most commonly used formulas when it comes to seeking financing for companies. One of the biggest problems faced by companies is the lack of liquidity, especially when it is due to delays in the collection of invoices. This is where factoring comes into play, an alternative financing system that allows a company to assigning receivables to a financial institution in exchange for liquidity immediate.

Likewise, we can currently turn to technology to avoid non-payments in SMEs and companies of any size. One of the most widely used technologies is Artificial Intelligence, which makes it possible to analyze in detail, before doing business, whether the other party will generate a non-payment problem. In this sense, it is a matter of anticipating possible liquidity problems, instead of responding to them with alternative financing formulas.

The Credit Scoring option

The credit scoring is a system that is used to rate credits and thus automate the decision making process when it comes to facing a risk of non-payment. Traditionally, it has been carried out taking into account different variables that allow to know the credit and solvency situation of individuals or companies.

However, nowadays there are platforms that allow you to applying artificial intelligence to credit scoringThis helps to automate processes and, thanks to a series of algorithms, to collect and analyze information about the creditworthiness of a customer or supplier.

What other ways are there to recover unpaid invoices?

Claiming unpaid invoices by amicable means is usually another of the possible options we have to recover our money, and the one we advise to explore, without a doubt, in the first place.

This can be done verbally, by telephone or e-mail, as well as by ordinary letter.

It is true that on many occasions, this route will not work. To avoid or mitigate these situations, technology has taken action and there are some platforms that allow us to use external artificial intelligence services, such as the software GAMCO's ARM SaaS for Payment Prediction. 

Through artificial intelligence, artificial intelligence has greatly improved the systems for the prediction of non-payment and detection of delinquent customers. Thanks to ARM SaaS software (Advanced Risk Management)GAMCO, there have been many companies that have benefited from the use of technology to avoid non-payments. In this way, they have been able to mitigate the damage caused by debts pending collection, anticipating the behavior of delinquent customers or foreseeing situations of uncollectible invoices. 

A solution for eavoiding SME defaults

If there is one thing that stands out about this platform, it is that it offers custom-designed solutions for SMBs. GAMCO can therefore tailor its solutions to the problems of each customer. 

In the case of the ARM solution (Advanced Risk Management) advanced risk management is worked out by means of predictive models to generate early warnings of non-payments for the optimization of management, profitability and safety of operations.

Everything you can spend on claiming unpaid invoices (plus what you will never recover) can be avoided by using predictive solutions that are already available to SMEs, such as the ARM SaaS software. In addition, you will help your company to avoid wasting good business opportunities due to excessive caution, as well as to avoid losing money due to non-payments, becoming more solvent and gaining in confidence and stability.