Scope
We agree the scope: the whole portfolio or debts above a set amount, the period covered and the report format.
CLAIMS AND DEBT RECOVERY / 07
Receivables audit and recovery strategy
Receivables on the balance sheet keep growing, but nobody can say how much is genuinely collectable and how much became a write-off long ago. We test the debts legally and debtor by debtor and give you a plan: what to pursue, how, and in what order.
- Practice
- Claims and debt recovery
- For whom
- Companies and entrepreneurs
- Format
- Moscow and remotely across Russia
What is happening
The finance director's report shows dozens of counterparties in arrears. Sales has an explanation for each, and the legal team has no time to deal with them all at once. What is needed is an overall picture: where money can still be collected and where it cannot.
The company is being prepared for sale, financing or a change of owner. The buyer or the bank is asking about the quality of the receivables, and 'it will all be paid' is not an answer they accept.
The chief accountant wants to write off bad debts and deduct them, but that needs grounds that will survive a tax audit: expiry of the limitation period, the debtor's removal from the register, a bailiff's decision that recovery is impossible.
What the law says
- The limitation period under the Civil Code is three years and runs separately for each overdue payment; the debtor's acknowledgement, such as a reconciliation statement signed by an authorised person, interrupts it.
- If the period has expired and the debtor pleads it, the court will refuse the claim; for tax purposes such a debt is treated as bad under the rules of the Tax Code.
- Where the debtor has been struck off the register as inactive, claims may in some cases be brought against those who controlled it under Federal Law No. 14-FZ of 8 February 1998 "On Limited Liability Companies", if their bad-faith or unreasonable conduct caused the obligations to go unperformed.
- A creditor may object to the debtor being struck off by filing with the registration authority within the period set by Federal Law No. 129-FZ of 8 August 2001 "On State Registration of Legal Entities and Individual Entrepreneurs".
- The right tool for each debt depends on the amount, the evidence and the debtor's condition: a claim letter, a court order, a lawsuit, the debtor's bankruptcy, or assignment of the claim under the Civil Code.
What we do
- We obtain the receivables ledger and reconcile it with the primary documents for each counterparty.
- We test the quality of the evidence: signatures and authority, acceptance certificates, specifications, correspondence.
- We calculate limitation for each payment and flag debts where the period expires in the coming months.
- We check debtors in public sources: litigation, enforcement proceedings, bankruptcy, register entries flagged as unreliable, pending strike-off.
- We sort the debts into groups by prospects of recovery and propose the method and order of action for each group.
- We identify debts that can properly be treated as bad and the documents needed to support that.
- We recommend changes to contracts and internal processes so that new receivables do not repeat old problems.
What we will need from you
- The receivables ledger with amounts, dates incurred and due dates.
- Contracts and primary documents for the counterparties under review, or access to the accounting system.
- Reconciliation statements, claim letters and correspondence about the debts.
- A note of any lawsuits already filed and any writs already with the bailiffs.
- Contacts in accounts and sales to clarify details.
HOW THE WORK IS BUILT
How the work is built
Review
We reconcile the ledger with the documents, calculate limitation and check the debtors.
Strategy
We deliver a report assessing each debt, grouping them by prospects and setting out an action plan and timings, and go through it with the finance team.
Execution
If you decide to proceed, we launch claim letters and lawsuits on the priority debts.
QUESTIONS
Frequent questions
How is this different from a financial audit?
A financial audit checks whether a debt is correctly stated in the accounts. We look at whether it can be collected: whether the evidence is sufficient, whether limitation has run, whether the debtor has assets and how to reach them.
Do all debts have to be reviewed?
No. It is often sensible to set a threshold: review large debts in detail and small ones by sample or on simplified criteria. We agree the scope at the start, based on the size of the portfolio and what the company needs.
Is a time-barred debt lost for good?
Not always. The court applies limitation only if the debtor pleads it, and if the debtor acknowledges the debt in writing after the period has expired, the Civil Code starts the period afresh. The period may also have been interrupted without that being reflected in the accounts. We check all of this against the documents.
NEXT STEP
Let us discuss your situation
The consultation is free of charge when an engagement agreement is signed: on it we say what has to be done and by when.