DEBT RECOVERY BASIC PROCESS FOR BUSINESS
Besides carrying out other business activities, debt collection is a matter that attracts many businesses’ interests. Through the process of working in the practice of debt collection for many customers and partners both domestically and internationally, we believe that debt collection activities need to be done with a clear and strategic process in every step in order to bring the best results as expected for the Enterprises. Therefore, in this article, we would like to present a highly effective debt collection process based on our own practical experiences and professional knowledge for your reference and consideration.
Stage 1: Conducting negotiations to request the Debtor to perform the payment obligation properly
Request payment by sending letters and documents to the Debtor
Technology platforms and devices such as email, phone, instant messaging, etc., are flexible, fast, and convenient when it comes to communicating information. This is the reason why in the process of conducting business, many enterprises prioritize using this medium for the purpose of communicating and exchanging information with customers. However, due to the nature of debt recovery, which requires strategy, accuracy, and certainty in every step, it appears that giving priority to choosing the form of sending documents and official letters will bring better results for many enterprises. A written request for payment is not only an appropriate method to show the enterprise’s soft and tough attitude towards the Debtor, but also a legal basis for the Enterprises to initiate a lawsuit, determine the statute of limitations for initiating a lawsuit and create advantages in the event that the involved parties decide to settle the dispute at the competent authorities.
Request debt payment by negotiation
Besides sending written, enterprises may also consider conducting negotiations step-by-step with the Debtor to make the requests more transparent and more robust by the following steps:
Reminder step: At this step, enterprises can use communication methods such as email, text message, and phone to show a peaceful, gentle, but also uncompromising attitude by extending the time for making payment in a specific and reasonable way to request the Debtor to perform the obligations as agreed in the contract properly. The extension time may depend on the nature of the industry and the transaction practice between the parties. Still, the extension time is about a week in everyday commercial activities.
Urging step: if the Debtor still does not make payment after the extension period, the Enterprises need to gradually increase the frequency of reminders to emphasize the Debtor’s obligation to pay while maintaining an amicable attitude with the Debtor. In addition, the Enterprises can implement negotiation measures to ask for cooperation to resolve the matter.
Warning step: After implementing the above steps, but the Debtor still does not take any positive actions, at this time, the Enterprises can start taking stricter and stronger warning measures. Specifically, according to the contractual agreement between the parties and the civil and commercial law provisions, the obligee is entitled to request the obligor to perform its obligations. If the Debtor fails to perform, they may face legal consequences. Therefore, in the content of the payment request document at this stage, the Enterprises should indicate the legal consequences to show a tough warning attitude. In addition, this document may have legal value if the Enterprises initiates a lawsuit requesting the Debtor to perform the obligation at a competent court or arbitration center.
As mentioned, debt recovery requires a clear strategy, so enterprises need to determine each stage’s purpose and meaning. For stage 1, it is necessary to require a soft but strict attitude of the Enterprises, which can cause the Debtor to cooperate in debt payment. On the other hand, for bad debts, this stage is the basis for the business to create an advantage for proceeding to the following stages. Besides, through the above steps, Enterprises can also collect and find out the causes of late payment and the Debtor’s financial capacity or ability to resolve the outstanding amount. By the above steps, Enterprises can clearly understand information about the business performance of the Debtor and have the basis to plan the appropriate direction to recover the debt in the fastest time. In case, the Enterprises have tried to create good conditions for the Debtor to perform the obligation but still do not bring any expected results, the Enterprises may consider taking stronger actions, which is the legal action as below.
Stage 2: Initiating a lawsuit at a competent Court or Arbitration.
After implementing negotiation measures and considering the feasibility of the case, the Enterprises may consider taking drastic measures such as initiating a lawsuit in a competent court or arbitration center. Depending on each case, the implementation time can last from 3 to 12 months.
Accordingly, in order to resolve a dispute at a court or arbitration center, it is necessary to meet the following three factors simultaneously: (i) Between the parties, there is a debt, and the Debtor has failed to perform the payment obligation that leads to the legitimate rights and interests of the Enterprises are infringed upon; (ii) Court or arbitration center has jurisdiction to settle the case in accordance with Vietnamese law; (iii) The parties must fully perform pre-litigation steps such as conciliation, negotiation, and notification in the event that the contract or law requires such activities before proceeding to initiate a lawsuit.
