However, in many organizations, collection is still handled in a fragmented way: Finance identifies the outstanding amounts, Legal receives some of the cases considered most serious and different departments take different approaches without necessarily sharing information and criteria.

This model can make it harder to see the portfolio as a whole and reduce the efficiency of recovery measures.

The first step is to know the portfolio

Before deciding how to collect, it is important to understand what there is to recover.

How many debtors are in default? What is the total value of the portfolio? Which are the largest debts? How long have they been outstanding? Are there guarantees? Which debtors have known assets?

These questions help build a diagnosis.

Based on it, the portfolio can be segmented according to legal, financial and strategic criteria.

Each profile requires a strategy

A small group of debtors may account for a large part of the portfolio’s value.

In other cases, there may be a very large number of smaller debts, for which a standardized approach may be more efficient.

That is why the strategy needs to consider not only the individual value of the debt, but also the cost of recovery, the debtor’s profile and the likelihood of payment.

Defining collection timelines makes it possible to establish when to make an initial approach, when to intensify negotiations and when to move on to legal action.

Negotiation also needs a strategy

Out-of-court negotiation should not be confused with simply offering a discount.

It is possible to set criteria for proposals, deadlines, guarantees and payment terms, taking into account the profile of each case.

When an agreement is reached, formalizing it properly is also essential.

Debt acknowledgments, guarantees and other legal instruments can provide greater security for the company and establish mechanisms to ensure the obligation is fulfilled.

And when is legal action necessary?

In certain cases, litigation may be the right path to pursue credit recovery.

But even the decision to file a lawsuit should be part of a strategy.

An analysis of the debtor’s assets, the existence of guarantees and the prospects of recovery are factors that can influence this decision.

The goal is to prevent the company from simply piling up lawsuits without a clear view of the recovery potential.

Recovering also means measuring

A recovery strategy needs to be monitored.

Indicators such as amounts recovered, agreements reached, portfolio performance, average recovery time and the performance of different strategies can provide important information for adjusting the approach.

It is this integrated view that brings Legal and Finance closer together and turns credit recovery into a results-oriented activity.

MV Law structures legal management projects for defaulting debtors according to the profile and goals of each company, combining analysis, negotiation, litigation and monitoring.

A portfolio of defaulting debtors can be a financial problem. With the right strategy, it can also become an opportunity to recover cash.