A talk about risk management by a company, even with a specialist, should begin with the basic, i.e. a good contract signed between the parties.
Not only does a precise contract allow to avoid problems, but it also facilitates cooperation with a specialist, e.g. a debt-collecting company. Why? Even such company may not do much if the claims are not well confirmed or documented. Unfortunately, this element is often neglected.
Meanwhile, even the slightest formal deficiency may lead to long-lasting disputes. If a debtor, whose situation is difficult, is able to show that its delay in payment is linked with any error on part of the creditor, it is very likely that it does so. In such situation, even a specialised debt collector may face problems with debt recovery.
First of all, a contract must provide for exact information on its subject and value, as well as the terms on which the payment is to be made (maturity date and form of payment, as well as the consequences of non-payment). A good idea is to attach sample order forms to it, sample VAT-invoices or documents confirming acceptance of goods – in will allow to avoid misunderstandings in many cases.
A contract constitutes the key to cope with payment practices in various trades. For instance, if our company is a sub-contractor to a big construction project, it is advisable to reserve payment in instalments for the subsequent stages of works completed in the agreed settlement period, e.g. every month. It is aimed to minimise the risk that upon completion of the whole project, your company will be left with no payment at all.
It is not possible to show in one article how important a contract is. How it looks like in practice may be explained by the fact that suppliers are prone to many concessions in order to win an order. Unfortunately – sometimes that give too many of them.
Informal arrangements, though shaping positive relations between companies and make it possible to gain new contacts, are burdened with high risk. If our debtor experiences unforeseeable problems, it will rather ignore any informal arrangements. Unfortunately, this shows that we must delimit a clear border of the concessions we are ready to make and start to take care of our own safety.
Published on: 14 November 2016