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Total Debt Management

Gilchery Ltd has since inception in 2011 been very successful collecting debts for all markets. The business of Gilchery is to help businesses that extend credit to manage the risk of their credit portfolio and recover delinquent debts cost effectively.
Based on our experience and knowledge of the industry, Gilchery would like to partner with your company to assist in the collection of overdue accounts owed to the company by the individual customers.

Statement of Problem

Most suppliers of goods and services will usually extend credit to their clients for periods rang- ing from 30 days to 90 days. Any account that remains unpaid from day 1 beyond that credit period is considered overdue while any account that has remained overdue for 90 days or more is considered a default.

Most businesses prefer to use internal resources to follow up overdue accounts and will only outsources those accounts they are unable to collect after attempting to do so for sometime.

Currently, the bulk of debt passed on to private debt collection agents for recovery by businesses is usually default debt that is overdue by one year (360 days) or more and the success rate in the recovery of such debt has been dismally low (in the region of 20%) which means that the balance of the debt is written off or recovered through expensive & lengthy court battles. Gilch- ery Ltd encourages businesses to shorten the trigger times for outstanding overdue debt.

Chances of success in collection are much better where are outsourced earlier and this benefits cash flow through reduced costs. It is an acknowledged fact the longer a debt remains outstanding, the harder it becomes to collect and the more resources required to collect such a debt.

The Opportunity

Your company can exploit the following opportunities:

  1. Improve profitability through reduction of profit leakages occasioned by delinquent ac- counts. Your company should have systems that are able to identify within a reasonable period when an account becomes overdue. If the account is 90 days or more overdue, then this an obvious delinquent account and the company should immediately assign the ac- count to the collection pool for remedial action. If the delinquency is not tackled in good time, it graduates to default and the company is likely to suffer profit leakage through fund- ing and opportunity costs associated with attempts to recover the debt.
  2. Growth of capital base through reduced debt write offs. Customers who delay or don’t meet their obligations in time usually lead to eventual default cases. A default means that the company has to write off the amounts against its profit and loss account. Even where the accounts are not immediately written off, high provisions must be set aside in anticipation of these default. The ultimate effect is reduced profit and a poor return on investment (ROI) for its shareholders.
  3. Increase efficiency in accounts administration. The costs of collection can increase dramatically where the customer base has a high delinquency and default rate. These administrative costs are a charge against the P&L and erode profitability and liquidity if not checked.