Contract risks of work with accounts receivable

If you have problems with your counterparties, it is best to first try to negotiate the repayment or restructuring of the debt on terms acceptable to both parties. If it is impossible to reach an amicable agreement for some reason, there are only options to try to collect debts in court, or sell them to collectors (usually at a discount).

To start the procedure of collecting, at least it is necessary to constantly monitor the terms of payment under the contracts, and in a timely manner to identify which of them requires action to be taken to review or to recover. Overdue accounts receivable, for which the creditor does not take action to collect, may become uncollectible in two cases:

After the statute of limitations has expired;
On the basis of an act of a state body about the impossibility of collection, or liquidation or bankruptcy of the debtor company.

In this case, the creditor will be forced to write off such bad debt as a loss, which will have a negative impact on its balance sheet.