Whether it’s the cost-effectiveness of the process or the complexity of the legal process – these problems often discourage taking steps. In this article, we’ll explore why recovering small debts is more complex than you might think, and what strategies can be effective in such cases.
Small debts, big problems: why is recovering small debts a challenge?
According to data from BIG InfoMonitor, Polish entrepreneurs owe PLN 42.42 billion to their contractors. These data show the scale of the phenomenon and the systemic pathology in the area of debt settlement.
Jako przedsiębiorcy, usługobiorcy czy freelancerzy rzadko zakładamy, że faktura zostanie opłacona na czas, prawda? Jednak wcale nie musi tak być. Chyba, że wdrożysz w swojej firmie system monitorowania faktur i zaczniesz być asertywnym w obszarze egzekwowania płatności.
Jedynie czego potrzebujesz, to zastosować kilka praktycznych nawyków, by przelewy zaczęły wpływać regularnie, a nieuregulowane należności w końcu znalazły drogę do Twojego rachunku bankowego.
As entrepreneurs, service recipients or freelancers, we rarely assume that the invoice will be paid on time, right? However, it doesn’t have to be this way. Unless you implement an invoice monitoring system in your company and start being assertive in the area of payment enforcement.
All you need is to apply a few practical habits so that transfers start arriving regularly and unpaid receivables finally find their way to your bank account.
How to recover small debts at low cost?
What is advantageous from the creditor’s point of view is that there is no minimum recovery amount. The lack of procedural contraindications to asserting one’s rights is a big plus, but one must also remember to assess the profitability of the debt collection activities undertaken.
Let’s be honest, the difficulty of enforcing small receivables (up to PLN 1,500) lies in the potentially unfavorable relationship between the costs incurred and the benefits obtained. During the debt collection process, it may be necessary to incur additional costs (administrative, legal, communication, debt collection services, court enforcement), not to mention the costs of lost time.
Of course, not all of them have to occur at the same time, but when using traditional debt collection methods, it may turn out that the actual amount recovered will be only a small percentage of the value that was originally due to us. Therefore, when you contact a traditional law firm and ask about recovering small amounts, you will most often hear – if not a direct refusal – then cold pessimism about the chances of recovering a small debt.
In the case of debt recovery from foreign contractors, the bar is set even higher. We attracted the client with competitive (Polish) rates, and now we have to pursue our rights in countries where the costs are three times higher. Not to mention other barriers such as language or lack of any knowledge about local procedures and legal frameworks.
Therefore, as Cash Collector, we have created a system that optimizes the debt collection process, giving it the form of an intuitive application for monitoring and recovering receivables, also in European Union countries.
If you have such a need, check its capabilities right away, or see what to do to try to convince the debtor to pay the invoice on your own!
Protect yourself against an unreliable contractor
Each corrective action should be accompanied by the introduction of preventive procedures. Already at the stage of selecting business partners and clients, it is worth assessing their credibility.
To secure the financial liquidity of your company, start selecting clients, avoiding those with questionable financial reputation. We know that in business you can rarely afford such selection, but spending time and resources on work that later does not bring financial results will certainly not lead your company in the right direction.
There are many ways to examine a company’s financial health. One of the easier ones is the National Court Register, a publicly available database collecting information on companies, cooperatives, branches of foreign enterprises located in Poland, and even associations and foundations. In addition, it is worth using e-KRZ, the electronic database of the National Debt Register, which allows you to find information about debt and possible financial problems.
As part of the assessment of the other party’s intentions, when negotiating the terms of the contract, you can propose a non-standard interest rate for late payment. Typically, statutory interest for this type of delay ranges from a few to a dozen or so percent per year.
Remember, however, that the maximum amount of interest for delay cannot exceed twice the amount of statutory interest per year, so the adopted value is a maximum of 14%. See how the other party will react to such a proposal. If he is not in the habit of delaying payments, he will probably agree to this proposal.
Why do small amounts often go unpaid? Debtor psychology
Debt collection is not only a legal process, but also a psychological one. Recovery of small debts largely comes down to negotiation skills.
If you want to improve these competences, which are also useful in business, work or private life, we recommend the book entitled: “Negotiate like your life depends on it” by former FBI negotiator Chris Voss. It reveals the secrets of negotiation and communication strategies that are undoubtedly worth using when talking to the debtor.
However, before you read this book, familiarize yourself with the common knowledge about the psychology and motivation of debtors, which we have lost for you in several points. It is always worth trying to reach an agreement amicably (i.e. without the involvement of the court) before you start taking the next steps of hard debt collection.
Remember that delays in settling liabilities may result from various reasons. The most common reason for this state of affairs is a difficult financial situation, but some debtors deliberately avoid payments, taking advantage of system defects and legal loopholes. Of course, you will hear excuses from them indicating that it is not their fault.
In the catalog of the most common explanations, the following ones enjoy unflagging popularity: these sentences:
– I don’t have money to live
– I’m waiting for the transfer myself
– I forgot, I have so much on my mind
– I didn’t have time to deal with it
– I’ll make the transfer in a moment
– The accountant is on vacation
– I can not talk right now
When a debtor tries to arouse pity in you, remember to be consistent. This is the only way you will get your money back. Don’t forget that late payments can put you in a situation you don’t want to be in. The line between being a creditor asserting his rights and a debtor being vindicated can be really small. To avoid getting too close to it, it is worth monitoring current payments and being assertive in enforcing them.
Another challenge in the recovery of small receivables is the issue of the debtor’s priorities. With an insufficient budget, he must somehow manage risk and, with limited movements, maneuver his company so that it remains afloat. What is the debtor’s priority? Certainly those bills that, if not paid, will result in limited ability to run a business, e.g. telephone bills or subscription fees for programs needed for the work and operation of the company.
The debtor’s next priority may be employee wages. Even one day of delay gives the employee an excuse to report it to the National Labor Inspectorate. Such an intervention ends with a comprehensive check of the documentation regarding working conditions. Starting from health and safety instructions and ending with documentation of socket resistance.
Other institutions that debtors do not want to have anything to do with in the context of fee arrears are, of course, the Tax Office and ZUS. If you are not on the debtor’s list of potential priorities, nothing is lost, but you will certainly have to fight harder for his attention.
How to start collecting small debts? Show the debtor the consequences.
If telephone or written contact via standard messengers (SMS, e-mail) is unsuccessful, remind them of the additional consequences and disciplinary actions that you will take in the event of no response. You have the right to send the debtor a pre-court payment request the day after the due date. Don’t wait too long, because the sooner you act, the sooner you will get your money back.
Send a pre-litigation demand for payment, summarizing all the facts about the debt and setting a deadline for payment to be made.
Communicate additional actions you plan to take, such as:
1. reporting it to the National Register of Debtors,
2. charging an additional cost of statutory interest for late payment,
3. charging an additional lump sum of €40 to cover the costs of debt recovery if the debt does not exceed PLN 5,000, which you are entitled to due to the situation, even if it is a small debt collection,
4. initiating debt collection using a specialized company.
So far, debtors have commonly ignored this last argument, especially in the case of small debt collection amounts. They hoped that the costs of engaging a debt collection company would discourage the creditor from taking further action.
However, nowadays, the use of AI tools that allow for quick analysis of the case, assessment of the profitability of debt collection activities, recommending optimal steps of the proceedings, and then taking up the case by a network of lawyers and law firms specialized in this area, significantly reduces the costs of such a process, as exemplified by Cash Collector.
How to recover small debts as quickly as possible? Take advantage of Cash Collector’s services!
There is no shortage of companies on the market declaring that they can help in any such matter. After using the debt collection cost calculators, you will most often receive preliminary approval. However, at a later stage of verification (with the participation of the human factor), it turns out that the debt collection company decides not to deal with the case.
It is therefore not surprising that creditors are losing faith in the possibility of collecting small receivables. Therefore, understanding the market needs, we have built a system focused on recovering even small amounts, which additionally enables debt collection in European Union countries.
Amicable or pre-court debt collection carried out via our system is also effective in the case of small debts, and most importantly, it has a reasonable price and is not reserved only for large business entities where the average value of invoices is higher and, as a rule, their debt collection is more profitable. .
The Cash Collector debt collection application has various debt collection options that allow it to be used even by small businesses and freelancers. Now you can easily collect debts from your phone. Install it for free and see how easily you can not only improve the financial liquidity of your business, but also have a virtual assistant that makes it easier to plan cash flows.
How to get started with Cash Collector and recover small debts?
With Cash Collector you can operate under several cooperation models:
– you provide us with a larger number of unpaid invoices if this is not the first such situation,
– you treat the application as a tool for preventive purposes to be able to quickly respond to delays and prevent expiration,
– or in the “hybrid” variant, you carry out the debt recovery process and at the same time begin to supervise what is happening with current payments.
On your behalf, we perform all activities that will make the arrears reported to us a priority on the list of liabilities to be repaid by the debtor. Starting from contact and summonses, through pre-court payment demands, and ending with asserting your rights in court.
It’s easy! You create an account by creating a profile for your company. You enter only the most necessary data, and after logging in, you can start working. The application is intuitive, and the only thing you need to have is data about unreliable contractors. Debt collection has never been so easy, so we hope you are ready to start collecting your debts!
You can use the Cash Collector functionality using: web application, application available on Google Play and application available in the AppStore