How to assess the risk of non-payment of receivables?
Debt collection is a major strategic issue for any company concerned with preserving its cash flow and avoiding the permanent loss of uncollectible debt. Preventing the risk of non-payment and anticipating the consequences of an unpaid debt requires a rigorous analysis of the customer’s financial situation, the amount of the debt, the payment deadlines granted, and the available guarantees.
Debt collection agencies, bailiffs (the new name for bailiffs), and credit insurance services play an essential role in assessing solvency and implementing an effective recovery process, whether amicable or legal.
1. Analysis of the debtor’s profile
The first step is to collect as much information as possible about the debtor, whether an individual or a company.
Payment history
Debt collection agencies can consult the B2B debtor’s payment history. This is because they generally have the best tools for financial information on companies. If the debtor has already presented late or unpaid invoices , this increases the level of risk. Some companies are registered in databases such as the Banque de France , payment incident files (FICP, FCC), or the Banque de France files for businesses (FIBEN).
Financial data
A company’s accounting data (balance sheets, income statements, trade payables, cash flow) provide clear indicators of its solvency. In case of doubt, indicators such as the average supplier payment period or the debt ratio can help anticipate a deterioration in the situation.
Internal rating or scoring
Debt collection companies sometimes use an internal scoring system based on objective criteria: sector of activity, size of the company, country of establishment, frequency of reminders, behavior in the face of amicable attempts, etc. This score then guides the recovery strategy ( amicable or legal ).
2. Typology and age of the claim
Not all receivables present the same level of risk. The characteristics of the receivables strongly influence the likelihood of recovery.
- Amount of the debt : The higher the debt, the greater the risk of non-payment. A high amount can lead to lengthy negotiations or even litigation, especially if the debtor disputes all or part of the amount.
- Age of the unpaid invoice : The older a debt is, the lower the chances of recovery. The statutory limitation period (often 2 years in B2C and 5 years in B2B) can render the debt irrecoverable. Debt collection agencies therefore attach great importance to the age of the debt.
- Nature of the dispute : Some claims are contested due to poor workmanship, late delivery, or the absence of a formally signed contract. In this context, the claim is legally weakened. Litigation becomes likely, which significantly increases the level of risk.
3. Legal and environmental context
A rigorous assessment of the risk of non-payment cannot ignore the analysis of the legal and environmental context in which the debtor operates.
- Collective proceedings : When a company is subject to receivership or liquidation, the prospects of recovering the amounts owed diminish considerably. Debt collection agencies rely on information from court registries and legal notices to anticipate these situations and adapt their strategy.
- Sector risks : Certain sectors of activity, such as catering, construction, and retail, structurally present higher risks of failure. Furthermore, the global economic situation and geopolitical tensions can also weaken the solvency of a category of companies.
- Geographical location : Economic stability, the legal framework, the effectiveness of legal remedies, and the existence of bilateral agreements are essential parameters in risk assessment. For example, it is important to distinguish between managing a debt in France and managing it in Morocco, Brazil, or Italy, as each country has its own specific legal and institutional requirements.
4. Quality of the supporting documents provided by the creditor
The chances of success in a recovery action depend largely on the strength of the case provided by the creditor. The more complete and reliable the supporting documents, the more legally defensible the claim will be.
The presentation of a duly signed contract, an accepted estimate or a compliant purchase order constitutes essential proof of the existence of the debt.
Similarly, an accurate, detailed, and timely invoice significantly reduces the risk of disputes. It must include all required legal information: company name, VAT number, due date, late payment penalties, etc.
In a B2B context, it is also essential to demonstrate the proper performance of the service or the actual delivery of the product. This can be demonstrated by means of a signed delivery note, a receipt, an email confirmation, or even a partially paid invoice.
5. Debtor’s reaction to the first reminders of non-payment
Once the first reminders have been launched, the observed behaviors also serve to refine the risk assessment.
- A complete lack of response from the first contacts is often a warning sign. It can indicate bad faith or financial incapacity.
- Attempted negotiation : A debtor who seeks to negotiate demonstrates their recognition of the debt. Even if they cannot pay immediately, this opening suggests an amicable outcome.
- Aggressive protest : Some debtors respond immediately to contest the debt, without any solid foundation. This behavior often indicates a desire to delay payment or force the debt to be abandoned.
- Partial payment : A partial payment or prompt settlement is a good indicator. It shows that the debtor is willing to cooperate and that an agreement is possible.
Assessing non-payment risk allows companies like GESTION CREDIT EXPERT to maximize recovery chances while limiting costs and delays. For each debt, it’s not just about recovering a sum, but also about taking the right action, at the right time, using the right method. Contact our debt collection agency to assist you in your efforts.