As collection professionals, we sometimes take it for granted that all the jargon we use is common knowledge.
In some cases, however, definitions are essential.
(Re)Discover all the terms and expressions used in the field of debt collection: the procedures and methods used by a creditor to obtain payment of sums owed to him.
Mastering this terminology is essential for economic players to effectively manage their outstanding receivables, i.e. the sum total of sales made but not yet paid.
The management of trade receivables is crucial to a company’s cash flow.
A customer who fails to pay an invoice on time can jeopardize the financial health of the creditor company.
In the debt collection sector, terminology is used both in communication between professionals and in legal procedures.
It encompasses legal, accounting and financial concepts, and is essential to a good understanding of collection issues and procedures.
The creditor is the party to whom money is owed, usually a company or financial institution.
A debtor is someone who owes a sum of money, often a customer or borrower. If a customer does not respect the payment schedule and does not pay the amounts due on time, they become a debtor.
Trade debt represents the money that a company must receive from its customers following the sale of goods or services. Managing trade receivables is an integral part of a company’s financial strategy, as it has an impact on its liquidity and its ability to cover its own costs.
When a debt becomes a burden for the company, because it is not paid within the agreed deadlines, the company can proceed to collection. This stage means that the company takes specific, organised steps to recover the funds owed. These measures may include out-of-court reminders, the involvement of companies specialising in debt collection, and, as a last resort, the institution of legal proceedings.
Debt collection is a delicate stage that must be carried out while preserving the relationship with the customer as far as possible, and this requires a good command of the communicative approach and the legal aspects of the process.
Outstanding trade receivables are an important element in a company’s cash management. It is the sum of sales made to a given customer that has not yet been paid for. A high level of outstanding receivables can signal a potential risk for the company, as it indicates that significant sums have not yet been recovered.
Keeping a detailed register of outstanding debts helps to identify late payments and bad debts, which is crucial when it comes to making decisions about collection or writing off bad debts.
Effective monitoring of outstanding receivables involves coordination between the sales, accounting and finance departments, and requires appropriate management and analysis tools to minimise the risk of payment default.
