This is a question many directors and managers are surely asking themselves. The pandemic is having severe impacts. Specialized institutions and economists are to a greater or lesser extent forecasting interruptions in the chain of payments.
Although the economic impacts may seem uncertain and the options for curbing them today limited, there are always actions to take to be better positioned when you line up to collect now and later:
1- Organize and plan, have a view of your clients and their financial capacity. Having appropriate support documentation and professionally managing collections can make all the difference. This includes periodically reviewing how much clients owe, how much for interest, and how the amounts are documented or guaranteed. It also includes taking measures, judicial or otherwise, to avoid damaging a guarantee or instrument: refiling an attachment that is about to lapse, realizing that a check or a promissory note –while allowing petitioning for immediate attachments and entitling holders to shorter processes- create the obligation to claim within a short period because they expire (“lapsing”).
2- Be open to negotiating and understanding, but take actions to protect yourself. This is not only in order to collect sooner but also to safeguard the liability of the company’s leader during the storm. For example, I can maximize the chances of collection by splitting up a debt or giving an extension of the term, but in that case I should probably make very sure that the instrument documenting it or how it is guaranteed does not require avoidable legal actions, which given that courts are closed can make it more difficult to collect when the time comes (for example, with a promissory note or simply having a signature notarized). One aspect to be very clear on is how nonpayment of a single installment makes it possible to collect the total debt. You must also see whether it is possible to give reductions in debt amounts, and what to ask for in exchange, among other things, to defend the guarantee if the debtor later goes into insolvency (under the insolvency provisions of law 18387 certain transactions, particularly refinancings, can be considered suspicious if their terms are not duly reflected). Finally, of the long menu of available guarantees, you have to see which ones can be negotiated with the debtor and which are more advantageous given their costs, duration and the type of collection procedure (enforcement) they afford. An ideal guarantee in normal times may not be so if the courts are operating with minimal activity as they are today.
3- Know how far you can go with negotiations and when it is time to take formal action (or do so in parallel). The rules of the game are clear, except in the case of insolvency –which fortunately will in any case affect a minority of debtors— in that the one who gets there first is the one who collects first. And this basically translates into the one who attaches first. Which means you have to be alert and have the right timing. While the Judiciary ordered a four-week “health holiday” and court activity today is very limited, there are still actions that can be taken and that are available even in this context. For example, when a debtor is causing assets to disappear, or cases where a debt is about to lapse. There are other simple but possibly necessary actions that don’t even require going to court (such as giving notice through a notary or sending a telegram).
In uncertain contexts managing a portfolio and reducing delinquency requires careful case-by-case analysis and rapid action. Not all situations are equal and there is no one right response. But experience indicates that it is not good to wait until the storm is over to start dealing with its effects.