For many companies the end of turnover year is a limit of anticipation for settling liabilities by debtors. In this period, it is worth to clean the balance from debts that are hard to recover, for example by selling them to debt collection agency. What exactly “cleaning the balance” stands for and is it profitable for business? You will find out the answers in the article below.
Lost receivables – is it possible to squeeze something out of them?
The end of turnover year is a time of closing the balance, when companies have to organize their receivables, including the statute barred ones, the ones after unsuccessful execution proceedings, the without any chance of payment and the small ones, which are not worth pursuing in court proceedings.
Leaving the receivables that are hard to recover untouched has an unfavorable influence on the financial image of the company. An often used solution on how to get rid of these receivables is to refer cleaning the balance to a professional debt collection agency. This service involves buying the package of hard to recover debts that are present in company’s assets. This way, the business entity not only improves its financial image, but, what is even more important, it avoids long-term, costly judicial proceedings.
In order to sell above mentioned receivables, it is necessary to prepare the following:
- agreement and invoices proving the existence of the claim,
- a copy of payment order or court judgement,
- a decision about discontinuance of the execution due to its ineffectiveness.
How does it pay off?
Thanks to cleaning the balance, the company gains not only previously mentioned image advantages, but also the economic ones, the decrease of tax liabilities among others, because hard to recover debts are written off without the need to obtain enforceable title and the decision about discontinuance of executory proceedings. It allows to present the real financial state of the company in the balance as well, and it enables to solve overdue cases. Cleaned balance makes entering into a new turnover year possible without hard to recover amounts, giving new opportunities to make the profit without lost receivables.