As time goes on, why does it become difficult to collect delayed debts and retained debt?
"It is because the debtor goes bankrupt."
A debtor who delays the payment for your company is not just delaying payment for your company. Payments are delayed to the other creditors as well. These debtors often go bankrupt after two or three years.
Debt collection from a bankrupt company is extremely difficult. This is even more difficult for non-secured general debt. Therefore, it becomes difficult to recover with the course of time. Besides this, there is also a reason that the priority of debt falls. Debtors, whether consciously or unconsciously have a debt priority.
First, between domestic and overseas creditors, domestic creditors are given priority. In domestic, payments to banks, large suppliers, employees, etc., are given priority. Time also affects priorities. With current and past debts, current debts generally have higher priority.
In this sense, it can be said that debt recovery is easier if transactions continue. However, from the point of risk management, credit transactions with customers with delayed debts should be deferred.
This is, in a sense, contradictory but it is unavoidable. In any case, you may think that the priorities for foreign creditors and past counterparties are quite low.