Ş. Burak ÇOBAN
The concept of debt:
When You need something, you borrow it
and you're in debt to the lender. When you
give it back you're out of debt.
In Türkiye there is common used sentence like
for debt “Borç yiğidin kamçısıdır”
History of debt
In early Greece debt was physically tied
to bondage, for if one was unable to
repay their debts they simply became
property of the lender.
In his wisdom Solon, the great lawgiver,
passed a law in 594 B.C. that outlawed
debt bondage and canceled all
outstanding debts. That was of course
good news for those who owed money
but not so for those who had lent it.
It was in the Italian banking system
in the 1300's that modern lending
got its start. Using a bill of exchange
a bank could lend money, designate
from among dozens of currencies
and transport it safely over poorly
Debt chasing is probably the area of
business where negotiation is needed so
much that it is almost a matter of routine
the problem is that so often, the only
excuse for lack of payment is lack of
intent, and this can lead the unwary
negotiator into a situation where
AGGRAVATION is endemic.
Collecting debt is best done in
person, your own or an agent’s.
A bad debt is no different from
theft, except you know the name of
Any payment is better than none.
Collect what you can and run.
If necessary, agree for part
payment in final settlement.
People never like paying bills of course
and will use every opportunity to couch up
the readies as late as possible but not
paying bills increase the total debt…
Especially the credit
card debts in Türkiye
at the last years
Credit card users in
Türkiye use cards
unconsciously like the
In addition every lenders hates breaking off
from the day to day running of business to get
on the phone to those late payers. It is a fact that
most business fail because they do not know to
control their debtor list.
So, if you are a lender how do you go about
getting your payers to pay up?
Much will depend on the type of debtor
you’re dealing with, the size of the debt and your
willingness to go to court. Assuming the debt is
significant, provable and you are prepared to go
to court, there are a number of options at your
disposal. These options are:
DIY (do it yourself) collecting: By using
credit master. In order to avoid the harms of
debt-chasing, firms should facilitate effective
“credit management programs”.
Using a third party: The third party usually
means Collecting Agents (factoring firms), Non-
Court Actions, Solicitors specializing in debt
collection, statutory demands and Court Actions.
Threat: It is an illegal and unethical way of debt-
Do It Yourself Collecting:
First of all, set-up a system to track outstanding invoices.
Once a payment becomes due, star chasing. Identify the
correct contact and issue a polite reminder letter as a
simple first step.
Worth doing is drawing up a timetable detailing action
you’ll do at each stage of the debt collecting process i.e.
letters, pone calls. Also, record and retain all
correspondence with your debtors, including fax/e-mail
remainders and dates when actions are taken. If the
debtor is showing signs of employing delaying tactics, try
to se a date for resolution of the payment problem
Most important of all, keep a file or
recording the date of each action, which
individual you contacted, and the contents
of any telephone conversations. Simple
isn’t it? Well not quite. But it should make
your life just that little bit easier.
If the payment is considerable and you fail
to get any satisfaction from the debtor,
consider the option of debt-chasing tactics
which would be the most cost effective
and profitable which to employ.
Credit Master helps to pro-actively chase
debts in a more focused, timely manner,
which, if used correctly, will lead t improve
cash flow. Companies using Credit Master
have found a noticeable reduction in bad
debt, through early identification and more
targeted pursuit of problem accounts.
SIMPLE WAYS TO COLLECT
The most proper strategy depends on the
size of the debt -$31 calls for a different
strategy than $1200, or $34000.
It’s different chasing an individual than
chasing a company.
If it’s a company it depends on the size of
It can also depend on how important you
are to them.
Little debts owed by individuals:
steps to follow:
Write them a letter, saying its unlike them
not to pay promptly, and please could you
have the money. Use a bit of same on
Keep phoning them, politely but firmly.
If a cheque is there (they say) but for
some inventive reasons it never gets sent,
say you’ll send a courier around at sme
Big debts owed by individuals:
steps to follow:
You can try the steps used in 1 to 3 in the
previous case. But don’t let to much time go by
doing that. Instead’ go straight to the next step
Call in to see them. Call in at work, or at home,
or wherever you can find them. Not many people
can stand the presure of a personal call. And
remember, this is a big debt- one that’s
important to collect. The best way is to collect it
Little debts owed by companies:
steps to follow:
Make sure they have at least one letter from
you, firmly but pleasantly asking for the money.
Try wearing them down with telephone calls.
Phone daily, even twice a day.
Offer to send around a courier. This often breaks
through their weaker excuses and exposes a
realm of truth: they might tell you they’re having
temporary cash-flow problems, and that the
account will be paid within two weeks.
Big debts owed by companies:
steps to follow:
Try steps1,2 and 3 for small debts owed y companies.
But go through the steps faster. This is a big debt, after
al don’t mess around too long before you…:
Go to see them. Make an appointment with the credit
manager. If you get a lot of excuses just go without an
appointment unannounced, and plop down in reception.
Be polite and smile at everyone. Look like you’re
prepared to spend the day. Take something to read, or
even a laptop computer and do some work.
Sooner or later someone will see you. Ten you’ll either
get a cheque or you’ll find out what you’re really up
TIPS FOR RUNNING DEBT COLLECTION
EFFECTIVELY IN A SALES FIRM:
Get Close to the Customer:
Businesses must ensure they have the right individual’s
name for letters and phone calls.
Make ‘Credit Terms’ very clear:
Include a paragraph for the buyer to sign, agreeing to
comply with stated payment terms and conditions of
Stress payment terms, as a condition of sale
supersedes any buyer’s terms. Send it to a named,
It is professional, not anti-selling, to say “our business
allows 30 days to pay”.
Invoice effectively: Send accurate invoices and DO
INCLUDE payment terms and due date, date, delivery
date and method, description, price and total payable.
Achieve Adequate Collection Coverage
Set Targets and Priorities: a company boss should make
it clear to all relevant staff that THE COMPANY IS IN
BUSINESS TO EARN CASH FROM CUSTOMERS and
that A SALE IS NOT COMPLETE UNTILL IT IS OAID
The rate of cash inflow should be reliable in line with sale
Use Third Parties Sooner not Later: Some customers
ignore reminders and wait until they receive a significant
threat; using a third party can have an activating effect.
Take he case to the Court if you cannot take your money
in any way.
DIY collecting has some drawbacks such
that if the debtor whom you are dealing with, is
such a stubborn and hardnosed one, he/she
may develop lots excuses by using his/her
infinite imagination. In such a situation those
sentences are likely to be pronounced:
“ I am in conference with my accountant and will
ring you back”
“The cheque is on the post”
Or a debtor may use his/her secretary in order to
cope with the situation by making her lie as:
“Mr. Rich is on a business trip and he’s not
Tips In DIY Debt Collection:
Gather/record all he information you can
Be professional at all times
Make personal visits
Offer alternate terms of payment
If nothing works, take the case to the
Collecting By Legistation:
The most common option is the warranty of
execution. Here, the court gives bailiffs the
power to impound goods owned by the debtor-
either at his/her home or business- the
subsequently being auctioned off to raise the
But as we all know, warrant if execution never
helps the lender to recover all the money totally..
For ex; The 1,8 million YTL worth Mercedes car
of Cem Uzan could only be sold for a price
slightly above 200,000 YTL by TMSF!!!!
Alternatively, you can make a claim under a
charging order, should the debtor decide to
liquidate his/her financial assets.
Is, on the other hand, the debtor is a company
employee, an attachment of earnings order may
be enacted –in this case the debtor’s employer
being instructed to deduct a portion of money
from the employee’s weekly/monthly earning to
cover the debt.
Worth pointing out, more generally, is that you
can force your debtor into carrying out an oral
examination before the court if you require
further information on him/her. This may be
influential in terms of how you further proceed.
Taking an unsuccessful debt collecting
case to court has such a disadvantage
that, however the creditor gets all his
money back, most of that money is gone
to court & lawyer expenses
“Dont sue george when harry owes you
Thousands of people sue someone-or some
legal structure- thats simply not involved!!!
İf you are handling the legal action
yourself-and thats what we are talking
about in this chapter- then make sure you
go after the right debtor.
İf the debtor is an individual
Just go after the person whom you lend
*İf the debtor is a sole trader:
Just go after the person behind it
*İf the debtor is a partnership:
This time you are dangerous waters.
There may be a thousand of partners, you
should sue each of the partners
If the debtor is a trust
*You sholud sue that whole long name-
like “viacorp pty ltd atf james heath family
trust ta j&e copywriting”
İf the debtor is a company
*You can sue the company,itself.
Türkiye’s most important legal debt collecter is
TMSF yasal olarak el koyduğu şirketlerin
malvarlıklarını borçlarını karşılamak üzere satışa
TMSF son dönemde el koyduğu
şirketlerden bazılarını borçlarını tahsil
etmeyi hızlandırmak için eski sahipleriyle
anlaşma imzalayarak iade etti
Burdaki amaç: borçların tam olarak geri
alınamayacağından dolayı geri iadeyle
şirketler üzerinden borçları tahsil etmek…
Using A Third Party
Debt Chasing & Risk Management
Non court actions
Solicitors specialising in debt collection
Using a private investigator
Debt Chasing & Risk
Management Consulting Firms
May be necessary when the firm doesn’t
have a credit departmant
A good “risk monitoring and credit
management system” is cruical.
Because you can kontrol your risk by
monitoring debt chasing
Business shall be conducted so as to foster and
maintain respect and confidence in the collection
Laws and regulations shall be strictly observed in
the name of good relations with the authorities.
Cases shall be handled speedily, professionally,
efficiently and correctly.
Client contacts shall be maintained throughout case
Client funds shall be held in separate accounts.
Strict security shall be maintained regarding all
information acquired by the collection company
The debtor's integrity shall be respected at all times.
Factoring agencies: Work on a no collection-no fee basis
and charge 5-15 % of amonts collected, depending on
complexity and volume. Good ones collect over %80 in
the first month because of their third party effect and full
Factoring: Is the selling of accounts receivable on
acontract basis by the business holding them in order to
obtain cash payment of the accounts before their actual
due date – to an agency known as factor. The factor
than assumes full responsibility for credit analysis of new
accounts, payment collection and credit loses.
The result is more profit
It will be not necessary to offer incentive,
discounts, etc- to collect on receivables on
time.with these approaches in operation
you wont need to factor or discount your
invoices. Because the cheques are
coming in sooner, your cash flow
improves, the overdraft decreases(less
interest to pay) and you have funds
available for expansion.
Non court actions; include options such
as negotiation, mediation,conciliation and
Statuory demands; can be sent by tghe
seller, collection agent or solicitors
promising an application to court for the
formal winding up of the business if
payment is not made xx days.
Solicitors specialising in debt collection;
issue powerful letters in a short space of
time, charging a pre-aggreed fee.
Using a lawyer as a shock tactic
You can try asking your lawyer to send the
debtor a letter. The idea is to startle the
debtor into paying. This sometimes works.
“we act on behalf of saldıray ltd and we
are instructed that you are indebted to our
client to the amount of 1200$.
we advise that if the sum of 1200$ is not
received by our office within fourteen days
of the date here of our client will issue
proceedings against you for that sum
without further notice to you”
Using a private investigator
Not many people think of hiring a private
investigator to help collect a debt. İf you
hire one who works freelance, its not
ferociously expensive. These guys can
find out anything – or find anyone(if thats
Threat is another tool for collecting debt. İt
usually includes violence or physical
disruption. İt is definitely not advisable, but
may be used if nothing works and you
cannot still get your money back…
The purpose of tactics in negotiation is to get the
desired result. Debt-chasing is a difficult tactic to
*some people do not pay and never intended to
*some people intended to pay but find it
convenient to pay
* some people do not pay because they cant
*some people only pay if you make them pay
So every lender should consider
the followings before lending
İt is advisable for the lender to check the
credit worthiness of the debtor, since non-
payment could be an indcation of financial
* tighten p your credit policy. Check on
people and companies before you give
them credit. Also, get as much as you can
in writing about your aggreements,
delivery terms etc…
* before you start chasing a debtor using legal
proceedings, find out if hes worth chasing. That
is, find out if you ll get something at the end of it
*be ready to compromise and negotiate at any
*collect large debts by sending someone
around personally. Do it yourself if you have the
*if you still get a stream of hard to collect debts
then find a good debt collection agency and sing
up with them…
* keep in mind what a private investigator
can do for you. Sometimes the easiest
way to get a cheque is to ave one of these
gentlemen help you…
*if the debtor is using a lawyer, then use a
İt is very rediculuous for a smart lender chasing
the debt with lots of summons on his hand when
there is nothing left from the ebtor and nothings
for example on an individual debtor you should
get information like the following;
* driving license number and date of birth
* name of employer and previous employer
*adress, adress before..
*credit services banks etc that have beeen
enquiring about him…
On a compan you can get information like this;
*trading adress and registered office
*incorporation detailsissued shares and paid
*details of directors…
*writs and summonses served and
outstanding court judgements…
* default information including written off
accounts and accounts referred to a collecton
How debtors deflect attacks?
Ignore the attack ( pretend they didn’t hear
the attack an go on talking about the
Reframe an attack as an attack on
problem ( reinterpret the attack.)
How debtors deflect attacks?
Reframe from past wrongs to future
Reframe from “you” and “me” to “we”
You are so wealthy and we are so poor.
Reframe a personal attack as
friendly.(misinterpret it as friendly.)