Collection of receivables: terms and procedure

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Almost every company has to deal with accounts receivable. It is represented by cash, which must be transferred by counterparties in the future. Most often it occurs when working with a deferred payment or when providing installments and a loan. Such debt may be standard or bad debt. If there are no funds from the debtor within the established timeframe, then the receivables are collected.

Initially, firms try to peacefully solve the problem, using pre-trial methods. If they do not bring the desired result, then the creditor is forced to go to court.

The concept of receivables

It is represented by the debt owed to the firm from contractors. This debt arises from various transactions.

For any company, it is important that such a debt is not too significant, since it is often quite difficult to collect it. Often you have to deal with bad debts at all, becausedebtors declare themselves bankrupt or simply cannot return the funds due to poor financial condition. Therefore, it is necessary to provide goods on credit only to trusted and reliable companies.

Collection methods

The recovery procedure begins after there are no funds from the debtor within the specified time frame. Overdue accounts receivable can be collected in different ways. These include:

• Claim method. It involves the voluntary return of funds by the debtor with an accrued pen alty, the amount of which is usually prescribed directly in the contract. In this case, the creditor sends the debtor a claim, which indicates the need to return the funds. This method is usually ineffective.
• Judicial order. It is represented by a forced way of returning money. Collection of receivables through the court is considered the most effective. To do this, the company must file an appropriate statement of claim in court. In this way, you can not only return your funds and the accrued pen alty, but also request compensation for material damage.

Initially, a claim must be sent to the debtor. The court often does not accept a claim if there is no evidence of the use of a pre-trial method of resolving the issue.

Do I need to file a claim?

Many companies believe that if debtors do not return funds within the established time frame, then you can immediately go to court,in order to collect money by coercive means. In fact, to resolve this issue, the pre-trial method of resolving the dispute is mandatory. Without this, the application is often not accepted by the court.

The features of claim collection of accounts receivable include:

• often in the contract itself, drawn up between the two companies, there is a clause indicating the need to use the claim method, so making a claim is a mandatory step;
• as a standard, banks do not consider claims unless they are accompanied by evidence that the creditor tried to amicably resolve the issue;
• if the contract does not contain information about the need to draw up a claim, it is allowed to immediately file a lawsuit in court.

It is most relevant to immediately go to court if the counterparty is an LLC with a small amount of assets. Under such conditions, after receiving a claim, the company can be promptly liquidated by the owners, so the collection of receivables will become impossible. Therefore, in certain situations, it is optimal to immediately start a forced return of funds.

Rules for making a claim

If the company acting as a creditor decides to use the original claim method of resolving the issue, then it is important to figure out how the claim is drawn up correctly. Foreclosure on receivables is formed taking into accountrules:

• the document must contain basic information from the contract on the basis of which the debt appeared;
• indicate the number and details of the agreement;
• describes the conditions on the basis of which the debt arose, and also gives the date when the funds should have been returned;
• in addition, one should refer to different normative acts, for example, to the provisions of Ch. 30 GK;
• indicates the requirement on the basis of which the debtor must return the funds within a specific period;
• given negative consequences for the counterparty if he does not satisfy the requirements of the claim, represented by the accrual of interest and pen alties, the creditor's appeal to the court or other significant negative factors.

A free-form document is drawn up, but it must contain all the information on the basis of which the company makes claims against its debtor. If there is an uncollectible receivable, since the debtor is in bankruptcy, then usually the transfer of the claim does not lead to the desired result. In this case, the creditor must be entered in the register of creditors.

Debtor acknowledges claim

Quite rarely, debtors respond positively to a claim. Often the lack of payment under the contract is due to errors in the work of an accountant or other specialists of the company. Under such conditions, after receiving a claim, the organization promptly repays the debt.

If the debtor has no funds, then hecan still agree in writing to the existence of the debt. In this case, a simplified procedure for collecting receivables through the court can be used. The materials are considered by the court without the need for the presence of both participants in the process, so the decision is made quickly in favor of the plaintiff. This is due to the fact that the written recognition of the claim is positive evidence. Additionally, such recognition restores the statute of limitations.

What to do if there is no reaction?

Most often, creditors have to deal with the fact that debtors do not respond in any way to a correctly drawn up claim. In this case, it is required to use compulsory measures to collect receivables.

Initially, own collection service may apply, if available. Usually banks have special departments dealing with this process. Employees of the institution regularly remind debtors of the existence of a debt, and also use claims or personal meetings to influence non-payers.

If no action brings the desired result, then you will have to go to court.

Where is the claim filed?

The judicial procedure for repaying a debt is considered quite complicated. To do this, you need to draw up an application for the collection of receivables. This claim is being filed with the Arbitration Court. The court can be determined directly by the parties to the agreement when drawing up the contract, therefore, a contractual agreement is used.jurisdiction. If such information is not in the contract, then the rules are taken into account:

• as a standard, a claim must be filed at the location of the defendant, represented by the legal address of the enterprise;
• often the object of the dispute is a real estate object, and in this case the court is chosen at the location of this premises;
• if the contract specifies the place of performance, then this address is taken into account to determine the court where the claim will be sent;
• if there are claims against any division of the enterprise, then an application is sent to the place of its location.

If the plaintiff cannot decide where exactly to send the application, then you can use the help of court employees.

Rules for making a claim

When forming a claim, it is recommended to take into account some rules that allow you to initially form a correct statement. The basic requirements are as follows:

• overdue receivables are recoverable only by filing a claim in writing;
• indicates the court where this document is submitted;
• gives information about the two sides of the process, presented by the creditor and the debtor;
• the requirements of the plaintiff are entered, consisting in the need to return their funds, and it is additionally recommended to leave links to regulations;
• includes calculation of the price of the claim and the amount recoverable;
• indicates that the plaintiff usedpre-trial method of debt collection;
• gives data on the interim measures used, if they were used when drawing up the agreement;
• at the end lists all documents attached to the claim.

If the above requirements are violated, the application may not be accepted by the judge. Accounts receivable management is a complex process, therefore, in large companies, an appropriate department is formed. Specialists are engaged in calculations, regulation of debts, filing claims and drawing up statements of claim. They are usually represented by lawyers representing the interests of the enterprise in court.

What is the state duty paid?

The amount of the fee depends on the value of the claim, so you need to calculate it in advance.

It is recommended that the plaintiff, when drawing up the application, indicate that it is the defendant who must cover all legal costs. Typically, such meetings end with the judge taking the side of the plaintiff, so the defendant must not only return the funds due to the creditor, but also pay the legal costs.

How are funds returned?

After a positive judgment is made for the plaintiff, the firm can use a variety of methods to return the money directly. Methods are used for this:

• the debtor company can independently return the funds together with compensation and accrued pen alties;
• the creditor can apply to the bank where the debtor has an open current account in order towere written off, for which employees of a banking institution are required to transfer only a writ of execution;
• in the absence of money on the current account, it is advisable to transfer the writ of execution to the bailiffs, who can influence debtors in different ways;
• if the debtor has no funds and assets, then a lawsuit may be filed with the court to declare the enterprise bankrupt.

The best course of action is chosen by the direct lender.

How long does it take to repay the debt?

The collection period for receivables is three years. This period is the limitation period.

This period is renewed if the debtor acknowledges the existence of the debt in writing. Often there is no opportunity at all to repay the debt. In this case, write-off of receivables is used. This is usually required in situations:

• debtor dies;
• limitation period ends;
• debtor company declares bankruptcy;
• a decision is made by the court, on the basis of which the debtor is released from repayment of debts for various reasons.

The statute of limitations must be correctly calculated, for which it is desirable to use the information contained in debt reconciliation acts, claims or other official documents.

Debt Management Rules

Every company that has numerous debtors must manage accounts receivable competently. For this, special schedules are drawn up, on the basis of which the procedure for the return of funds is regulated. This will avoid the situation when the statute of limitations expires, so it will not be possible to collect the debt.

If the debt is recognized as bad for various reasons, then the receivables are written off. This situation is considered unpleasant for every company, as it loses its funds. Due to such a write-off, you can slightly reduce the tax base for corporate income tax.

Conclusion

Receivables must be properly managed by every company. If funds from debtors are not available within the established time frame, then it is required to use different methods of collecting funds. Only with proper management of receivables can debts be controlled and returned before the end of the statute of limitations.

For recovery, a claim or judicial procedure is applied. Most often, the judge requires that the companies first try to resolve the issue amicably. If there is no desired result after sending a claim to the debtor, then the creditor may apply to the court.