It is a frequent practice in commercial transactions to finance delivering goods and services by means of deferred payment. This period of payment in Bulgaria is in most cases 30 days.
In certain cases, however, the payments are not cleared off within the agreed payment terms. According to various studies delay varies between 20 days to several months.
In the event of continued delay or in a delay by several customers, the liquidity of any company might be jeopardized, and consequently its very existence.

In the practices of the financial institutions, which grant different kinds of loans, such as consumer loans, mortgages, credit cards, overdrafts, etc., customers also often fail to pay off their obligations in due time. This affects the price of crediting, and if no steps are undertaken to collect the overdue debts, the liquidity of the financial institution may be seriously jeopardized. There are some solutions designed to avoid such risks:


Solutions

Setting up an internal department with the company, involved with the collection of overdue debts from customers.

Benefits:
The employees are closely familiar with the nature of their own business, and with the business of their customers, which facilitates understanding the situation by both parties.

Investments:
In order to perform this professionally as a service, companies need to invest in infrastructure (phone switchboard system, specialized software, etc.), as well as in the training and payment of the employees involved.
Besides, the company must gain know-how and experience in structuring the specific processes required by this type of a venture, which on its hand takes time and additional resources.

Outsourcing the collection process to a specialized company - collection agency.

Benefits:
The employees of such companies are trained in various methods of carrying out negotiations and persuasion of debtors to pay off their obligations. In this option the companies do not need to invest in their own infrastructure and at the same time they receive their money faster. Major benefit is that the commission payment by the client is solely recovery success based.

An option enjoying increasingly wider application is the combination between steps undertaken within the company and an outsourcing solution, as well as an option in which the receivables are processed internally for a certain period of time and then are further assigned to an external specialized agency.
A lot of financial institutions and some large companies prefer processing internally their key customers, and delegating all other receivables to a collection agency.    

Benefits:
This option combines the positive aspects of the good internal knowledge of the business and the customers, with the professional and objective attitude of the specialized agency.
An additional benefit could be to compare the results between the internal and external collection, as well as sharing best practices among the partners.    

Investments:
There is still needed investment for the developing and training of an internal unit, but it is smaller in scale than if building a full-size internal department.

Debt Collection Stages

This is carried out in the form of telephone calls, reminder letters and text messages, sent to the customer-debtor concerning his/her debt. The communication is conducted gradually depending on the complexity of the case.

Advantages:
Cheaper and faster recovery of the receivables in comparison to the other methods. The debt is not burdened with additional fees and charges that later shall be paid by the debtor.

Employees of the collection agency visit customer-debtors at their home or at their workplace, in order to conduct face to face negotiations.

When?
This method is applied when the soft collection has not achieved the desired result.

In order to initiate legal collection, the creditor should make additional investment in state taxes, costs for consulting services and lawyer’s fees. All such expenses are added to the debt owed, which may increase substantially in size, and shall be payable by the customer-debtor.

Procedure:
The issuance of court decision is followed by act of execution, which means that the bailiff has the right to demand information about the debtor and his/her property, has the right to enter his/her home, and to make a list of his/her property, and then to sell it at an auction, plus the right to garnish the debtor’s bank accounts and earnings.