The bankruptcy moratorium is close to being history. As of June 30, any company that is insolvent will have, again, the obligation to request a bankruptcy declaration in the following two months.
The objective of this measure, which in these two years has extended its completion twice, was that the entities most affected by the Covid-19 pandemic had an additional margin to restore their balance of assets. A situation that, however, has not prevented the contests from growing in 2021 and that a large number of companies still fear for their business.
According to the latest European Report on Payments of Enter, 70% of companies believes that the economic scenario could get complicated soon and, of this group, 83% anticipate that this situation will directly affect their business to a greater or lesser extent. Estimates that have also been reflected in the latest harmonized business confidence index (ICE) of the National Institute of Statistics (INE), where it appears that this indicator has fallen by 2.5% compared to the last three months of the previous year, breaking its upward streak for five consecutive quarters.
If to this is added that the liquidity of the companies was reduced by 17,000 million during the month of January, according to the Bank of Spainand that the consolidated debt of non-financial corporations increased by 2.4% in September 2021 (latest available data), there could still be a significant percentage of companies at the limit. In fact, and despite the fact that the IMF’s economic growth forecasts for last year were promising, and that the bankruptcy moratorium is still in force, the latest data from the General Council of the Judiciary (CGPJ) show that, in 2021, company bankruptcy experienced a year-on-year increase of 29.4%, and 27.9% compared to 2019.
“To avoid reaching this bankruptcy situation and recover the financial health of the business in a sustainable way, the answer will be to prevent insolvency by reacting in time and protecting itself against defaults. On many occasions, companies are forced to extend collection periods, which ends up harming investments, growth and even payments to suppliers. For this reason, one of the main keys to safeguarding business survival is to address this last aspect”explains Victoria Betancor, head of insolvency proceedings of Enter.
Tips to optimize collection management
In order to help manage non-payments and thus avoid long-term indebtedness and the dreaded insolvency proceedings, the expert at Enter offers some tips for optimize collection management or recover debts that were given up for lost:
- Study the client’s situation well. The solvency of the client is a fundamental prior data that must be known in order to know if the payment will be delayed or not. Some questions to ask yourself: Have you already done business with this company? What is your payment history? Do you have any payment guarantee?
- Establish in the commercial agreement the advantages of making the payment on time. During the negotiation of the provision of the service, it is possible to present some arguments in favor of the debtor if he pays within a set period, an agreed amount, etc., as well as the consequences that not paying the invoice on the agreed date could have. It is a way to persuade the customer to show him that making the payment on time is more beneficial for him.
- Give bonuses if payment is made before the date. There is also the option of offering incentives for them to respond to the invoice earlier than expected. This helps to not only ensure payment, but it will also mean added value for the client, building loyalty in their commitment to the company.
- Apply measures to favor payment. In the event that it is necessary to contact the debtor because the payment has not been made on the date, it is important to do so in a friendly manner. To do this, the arguments must be prepared in advance and correctly structured, without improvisation.
- Have an alternative action plan prepared if the established payment is not met. In this case, it is necessary to have an alternative strategy prepared with the different options that can be offered (extend terms, more flexibility, split payments…), and what results would be obtained with each of them.
- Have the support of a company specializing in management and prevention of defaults. The best alternative will always be to have the advice and service of a company specializing in the prevention and management of bad debts, which professionally manage the entire process to achieve the best results and consolidate the relationship with the client, also allowing each company to focus on what matters most: driving the business.
- Promote financial education in the company to prevent defaults. A correct financial education is key when it comes to preventing and dealing with difficulties in this area, as well as to take advantage of those opportunities that arise as the business evolves.
