How to deal with defaults in a company?

The impact that can cause a non-payment to a company could be serious it could even end up sinking it. This article will address the main causes and consequences of defaults and some Tips for collecting debts. However, when a company meets a customer who does not pay, it is normal to get angry with the debtor for what the problems begin, without thinking at any moment that perhaps the annoyance starts from the same business. Therefore, in order to know if the causes are internal or external or not, we will present the following:

External causes of the company

The main reason in which a non-payment can be presented is the non-validation by the client of said amount for no apparent reason. Which is a notable default.

 Internal causes

• Incorrect data
• Allegation of expiration dates for different invoices
• The debtor does not receive his invoices on time
• Invoice not valid
• Duplicated invoice
• Invoices not delivered on time
• Data errors

In this regard, whether the causes are internal or external, many companies, feeling drowned by other people's debts, have had to close their doors, or have to figure out how to get their customers to pay their blackberries. For this purpose, they have had to create collection management systems, make an early claim on overdue balances and optimize the unpaid collection procedures.

Problems that cause unpaid

The defaults generally recent to small companies such as SMEs, or self-employed workers causing a crisis, instead, Large companies could face defaults since they have the necessary resources to be able to face a large number of defaults.

Consequences of defaults on the financial structure

In addition to a loss of liquidity that a company's treasury has to face, defaults cause the following problems:

• Current assets increase.
• It leads to a financial imbalance.
• It negatively impacts the financial statements.
• The financial costs are increased by the lack of financing of the unpaid accounts.
• Profits diminish.
• Expenses in cost companies.
• Administrative expenses.
• The sales team will be demotivated.
• Tensions within the company
• Price increase which will affect good customers
• The final consumer will pay the price increase.

However, These defaults can significantly harm a company before the banks, these financial entities, upon realizing the constant returns, will have you to demand guarantees from the company, in addition to reducing its credits and considering the company high risk.

Due to such consequences, the company must act preventively, decrease default rates, as well as maintaining contact with the debtor in the event of a certain problem to avoid any cause of non-payment, taking into account that Each debtor is different and will require a different treatment to recover the debt, and the means of collection must also be improved. optimizing financial management, and correcting the company's image, after all for the company, customers are and will be its most valuable asset.