24-Type of Debtor
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Introduction of Credit Management for Overseas Trade

36 Things You Need to Know About Credit Management for Overseas Trade

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24. Type of Debtor

I have classified debtors into six types from my experience. The lower you go, the higher the risk and the more difficult the debt recovery.

  1. Negligence type
  2. Deferred type
  3. Negotiation type
  4. Responsibility transfer type
  5. Forced type
  6. Sudden aggressive type

 

1. Negligence type

As the name implies, it refers to a company that delays payment due to mere neglect

It is a company that is not properly managed internally and is often found in Asian companies. This type of debtor can often be recovered without problems by proper credit management.

 

2. Deferred type

A debtor is people who try to delay payments. The big difference from "Negligence type" is that the delay is intentional or not.

There are many companies in abroad work in the accounting department that delay payments even one day without angering creditors. This type requires dealing with delays in a resolute manner.

 

3. Negotiation type

It is a type that tries to pay after drawing out terms that are favourable to the company by negotiating while keeping payment delayed. Favourable conditions include discounting, payment extension, and payment in instalments.

There are many problems with creditors, such as the inability to conclude a contract and incompleteness, and this can often be prevented by making arrangements such as a penalty for late payment at the contract stage.

 

4. Responsibility transfer type

A type that transfers unpaid responsibility to the creditor. In particular, the unpaid reason is replaced with a claim for product quality.

If it is a normal claim, it should occur when the product is received but it is not possible for the claim to occur at the time of payment itself.

This type of solvency will fight thoroughly in an attitude not to give up the lawsuit. If they have no solvency, claims are just excuses and debt exemption is often the real reason.

 

5. Forced type

Debtors who do not pay when not forced. Force refers to being sued, defeated or likely to be enforced. Seeing the other party's attitude, if serious, try to respond to the negotiations.

This will also determine if there is solvency and if there is an asset, proceed with legal proceedings so that a final verdict can be obtained early. If there is no asset, make it possible to collect some of the debt by responding to instalment payments and debt exemption.

 

6. Sudden aggressive type

It is a debtor who has no solvency and no willingness to pay and cannot handle it. These types have no choice but to give up. If you go to lawsuits, you might win, but there is no point when there is no property to put in force. It would be better to spend time collecting tax-free information and materials.

Remember, there are no forced type or sudden aggressive type debtors from the beginning. As the delay period lengthens, the management condition and financial condition deteriorate and change into such a type of debtor.

The classification of debtors also reveals the importance of early recovery.

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【PDF】Introduction of Credit Management for Overseas Trade

Introduction of Credit Management for Overseas Trade

36 Things You Need to Know About Credit Management for Overseas Trade

This ebook was created as a resource for those who have trouble with diverse trading or want to learn Credit Management in a rational.

 

Chapter (Excerpt)

  • Major Differences Between International and Domestic Transactions 
  • Trade Reference
  • Bank Reference
  • Collection Agency
  • Reasons Behind Difficulty in Recovering Delayed Debts
  • Mistakes in International Transactions Where Japanese Companies are Prone to Fail
  • Customer Analysis ~ 5 C's of Credit
  • Dangerous Signs
  • Five Principles of Debt Collection