According to a representative of KREEDIX OÜ, debt may be triggered by a variety of reasons: it can happen by accident and on purpose, caused by an ill-meaning ‘partner’ or victim of circumstance. How can you as an entrepreneur avoid running into debt through someone else’s fault – how do you ensure you get paid on time for the goods/services you sell? What are the danger signs you should pay attention to? These are the questions and fears an entrepreneur must face daily.
Most entrepreneurs are honest and they want to do business in the best sense of the term, Margit Ruusmaa, managing director of KREEDIX OÜ with extensive experience in credit and debt management, confidently assures us. KREEDIX OÜ is the parent company of REGISTER OÜ; Inforegister was once launched drawing on the needs of KREEDIX OÜ. Today, KREEDIX OÜ has a debt claims portfolio of 200 million euros and business clients are provided full credit management services.
Chain of debts and the chain method from the experience of KREEDIX OÜ
Estonia is just a small country and even smaller is the circle of business partners active in a similar field of activity. But the smaller the circle, the stronger the effect of problems on the whole circle. A chain of debts, to put it simply, is created when all parties are operating at their maximum financial capability and one company makes a wrong call, causing it to run late on a payment to another company, further causing the second company to become overdue on an invoice to a third company, the third to the fourth, etc until the vicious circle is complete.
The problem will then escalate because credit is not extended to a debtor, leading to a fall in turnover and cashflow, making it even more impossible to pay back debts, and so the company goes under. In real life, the situation is not as drastic, owing to the fact that there are multiple parties with very different financial capabilities – but it can be that several companies are indebted to one. What is certainly does is it produces a situation where there is little cash available – and not through the company’s own fault.
Kicking someone when they are down definitely does not help anyone – and this is where KREEDIX OÜ comes into play with a completely new approach – the application of the chain method. KREEDIX will firstly approach the debtors that caused the company to get into trouble, lending a hand in collecting debts or managing court proceedings. This has the effect of improving the company’s cash flow, allowing the company to meet its own obligations. You could say that all is well that ends well, but Ruusmaa invites us to consider that the best solution would be to avoid getting into debt in the first place.
Publishing debtors on Inforegister
An effective measure to take against uncooperative debtors or ‘runaway’ executives that do not answer emails or phone calls is publishing debtors on Inforegister. A notice regarding publishing claims is delivered to the concerned party and more often than not, this is enough to cause the debt to be paid or a repayment schedule to be agreed on. This means Inforegister* is the best possible measure for debt collection on the market today as it is the only free-of-charge credit check site in Estonia to publish Debt Labels, the Credit Score and now also Activity Stories about companies. You can file your claim on a debtor HERE.
*According to Alexa, inforegister.ee is amongst the TOP 100 most popular websites in Estonia. From August 2011 to February 2018, the site has had more than 140 million pageviews, in excess of 37 million visits and has more than 70,000 registered users.
As in every field, in entrepreneurship ‘things happen’ – you may be as good as gold as a manager, but you can never control everything (force majeure, developments in economy etc). According to Ruusmaa, this is all the more reason to manage what can be managed: people, processes and money – since these are vital to any company. And here is where KREEDIX OÜ is able to both advise and help out.
Debts and the formation of a chain of debts can easily be avoided if you choose not to trade with problematic enterprises/entrepreneurs or at least you do not extend credit (and sell only on prepayment). All you have to do is do some background research on your client and set optimal payment terms and credit limits and regularly assess the situation. For that purpose, KREEDIX OÜ conducts analyses of invoice portfolios. The science-based Credit Score helps evaluate the state of the portfolio issue relevant credit recommendations.
The fear of ruining the working relationship
It is the client that brings turnover and profit to the company, so a great customer relationship is vital to any business. This is what makes it so uncomfortable and frankly frightening to address clients with unpleasant topics such as debt. How do you collect a debt – bound to cause some distress to the client – and sell to the same customer the next day? An upset customer is more likely to choose a competitor over you. What is the solution?
The answer is simple – keep sales and credit management separate in a way that the client can sense the distinction as well – so that any adverse feelings from possible debt reminders are not transferred to sales personnel. This is much easier to achieve when the debt reminders are sent by a service provider instead of the company itself. If the former communicates in a neutral and pleasant manner, without judgments, repayment is most likely and the client will remain loyal to the company.
Define your guiding principles and use them to your advantage
Ruusmaa sums up this topic short and sweet: ‘If everyone kept their side of agreements and did not live beyond their means at the expense of others, we would have no need for credit policies or credit management. But since man is imperfect, that is not the case today. This is why a smart entrepreneur keeps an eye on her/his money and a friendly yet firm handle on financial relationships with business partners.’
The long-term experience of Marie Rosin, board member of KREEDIX OÜ in the field of finances only confirms these words as well as the fact that those who have a steady grip on their credit portfolio earn the respect of their partners. Marie Rosin adds that life is becoming more and more difficult for debtors with each passing day:
Personal media pages for big-time debtors and crooks
“That’s right! How long will we suffer in isolation about being double-timed by the same person over and over again, simply waving off the claims of creditors and starting company after company to go for another round with the same game plan. Big-time debtors managed by big-shot executives must also sense the substantial responsibility and not just to their own company, but to creditors as well, whose extension of trust they are violating. Unfortunately, this is often not the case and the financial pit of unmet obligations amounting to millions with only a couple thousand’s worth of assets to cover them can not be seen as anything else than simple lack of responsibility. We will create an overview of such characters all in one place – Inforegister’s business media,’ Rosin concludes.
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