When accounts payable have maturities of more than 90 days, they are called past-due portfolio and are the cause of bankruptcies in a third of SMEs and bad practices that impede organizational growth.
Six proven strategies to recover your past-due portfolio
However, there are six forceful actions to eliminate defaults and late payment in organizations. These are the following:
1. Diagnosis of accounts receivable
It is necessary to define whether or not overdue invoices are recoverable and, if possible, establish a recovery period.
Debtors are rational economic agents and make decisions about paying or not depending on the different types of scenarios they would face. For example, debtors are more likely to commit to paying if they see that what they gain from a settlement is more than what they stand to lose.
But beyond the quantification of profits, the reputational gain and importance of honor and good name should be mentioned.
2. Know the business cycle of debtors to propose a payment agreement
This implies studying each case, treating clients in a personalized way and knowing the business cycle in advance.
The generic statement should be dismissed. It is vital to know the debtor’s business cycle, for example, to know how often they receive income and how they could pay off their debt. Customizing solutions is key to
3. Negotiate the overdue portfolio with the strategic people of the debtor company
Finding out who the decision makers are represents the first step to successful negotiations.
The first thing is to determine the concentration and autonomy of decision makers in the debtor company. Sometimes he is the manager, but in others, he does not act without the endorsement of indirect actors such as his financial team or his family. In this way, it is possible to address those who make decisions autonomously (strategic range), instead of addressing those who have low decision-making power (tactical range).
The latter may not see or understand the opportunity that is presented before their eyes in a negotiation process. It is necessary to consider the points of contact and the order in which they are addressed within an organization.
There are managers who delegate their responsibility to a high degree, so approaching their right-hand man or middle range can open doors, on the one hand, or push back decisions, on the other.
4. Communicate from the beginning the conditions for the recovery of the overdue portfolio
Talking from the beginning about the conditions of the agreement, the wills and capacities of each party contributes to the success of the negotiation. It is to determine the degree of reliability of a debtor from our interactions.
It is suggested that from the beginning the times, expectations, wills and capacities of the parties be put on the table.
Additionally, it must be kept in mind that conditions may change between the initial contact and the signing of an agreement so that false expectations are not generated. Both parties must be aware of the above in order to build a lasting and effective agreement.
5. Constant communication is key to building trust
It should be considered that the negotiations and their results are not necessarily going to happen quickly. The creditor must carry out a detailed follow-up of each account receivable to the degree of understanding each debtor and the relationship that exists.
Where there is good communication and trust gained, the recovery will be faster and less expensive instead of proceeding to coercive mechanisms that are adversarial by nature, slower and more expensive.
6. Make viable payment agreements for both parties
A good portfolio manager is someone who knows how to guide a person through a process so that they can, responsibly and in an organized manner, meet their payments. In a well-done management, it is known to recognize when a debtor will respond better and deserves the treatment granted in a persuasive collection, as well as when to protect the health of a portfolio through coercive tactics.
Alan Ramirez Flores Founder and CEO of Coperva, a leading non-performing portfolio recovery firm. It has various recognitions for innovating the industry in which it participates. Author of the book Leadership for [email protected] Lecturer.