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A bad debt can arise in many ways, but it often occurs in connection with invoices where a debtor has not paid a creditor's invoice for a delivered good or service.

An outstanding balance can also arise when a borrower fails to fulfill its obligations to a lender, such as a bank or a private individual.

What is an outstanding balance?

A financial receivable is an outstanding balance between a debtor and a creditor - or between a lender and a borrower.

An outstanding debt occurs when a person or company fails to meet their obligations, such as paying an invoice or repaying a loan.

Outstandings can arise both between and across individuals and companies.

How is a financial debt handled?

There can be many reasons why an outstanding debt arises. Often an outstanding debt is simple, but it can also be a deliberate act on the part of the debtor, for example, if the debtor does not have the funds to pay or repay, or if the debtor for some reason does not want to pay.

A receivable is treated as an asset for accounting purposes and thus as part of a company's balance sheet. In company accounts, a financial receivable is often recorded as 'trade receivables'.

If the financial outstanding is unintentional on the part of the creditor and there is no prior agreement on the outstanding matter, a reminder process or debt collection process will often be needed to collect the funds.

Help with an outstanding issue

There are many ways to try to settle a debt.

One of the tools that can assist with a financial dispute between two parties is debt collection. Debt collection can either be carried out as self-collection, where the company handles all or part of the collection process itself, or it can be carried out by a debt collection company or a lawyer.

In Denmark, only authorized debt collection companies and lawyers are allowed to help others with debt collection. There are approximately 120 companies authorized by the National Police to operate a debt collection company.

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