Bad payer
What is a bad payer?
A bad payer is a person or a company that one or more times does not pay its outstanding balance (typically an invoice sent by a company) on time or does not pay at all.
There is basically no legal definition in this area or when you are categorized as a bad payer. It is therefore up to the company itself to define and categorize when a customer should be considered a bad payer.
Most debt collection agencies and law firms dealing with debt collection treat the topic of "bad debtor" very differently. For example, a distinction can be made between the degree of bad payer.
Degree of bad payer
Despite the fact that there are no clear legal definitions of a bad payer, in practice there is a wide range of degrees and categorizations of a bad payer. Such categorization often makes sense when accounting departments have to decide how to deal with a bad payer. After all, is a bad payer someone who has mistakenly not paid their invoice on time? or is it someone who consistently never pays their invoice?
It is widely believed that persons or companies who pay a few days after the last payment deadline are not categorized as bad payers, whereas companies and individuals who always need to be reminded are often bad payers.
How is a bad payer treated?
The treatment of bad payers should be formalized so that the accounting department or the financial managers in the company have a clear framework for how, when and which methods to use. Fortunately, there are many options for dealing with a bad payer in Denmark. These include calling the debtor, sending a friendly reminder, sending reminder letters without a reminder fee, sending reminder letters with a reminder fee, and imposing interest and a compensation fee. Please note that the compensation fee only applies to B2B.
If the reminder process is not sufficient, there is also the option of carrying out a debt collection process, either through self-collection, where the company carries out all or part of the collection process. Alternatively, the company can send its bad payers to a debt collection agency or lawyer specializing in debt collection.
Legal requirements and rules on the treatment of bad payers
There are some basic requirements and rules that you as a creditor must respect when dealing with bad payers.
The requirements are mainly about time limits, the imposition of correct fees and what it takes before debt collection can start.
Find the applicable requirements and rules here on Collectia's website.
