Accounts Receivable: How to Protect Your Business from Risks

The financial health of any enterprise largely depends on how effectively it manages accounts receivable. Overdue debts from partners are among the main causes of liquidity loss, financial difficulties, and even bankruptcy. Successful debt recovery is never accidental — it is the result of a well-thought-out legal and financial strategy.

Accounts receivable represent the funds owed to a company by its counterparties for delivered goods or services. These receivables can be current, where timely repayment is expected, doubtful, if there is a risk of non-repayment, or uncollectible, when recovery is impossible due to bankruptcy or liquidation of the debtor. The reasons for their occurrence may include contractual payment deferrals, disputes between parties over the scope or quality of obligations fulfilled, financial problems of the counterparty, clerical errors, or a lack of proper payment control.

For businesses, the accumulation of receivables results in a shortage of working capital, difficulties with planning, reduced profitability, and the risk of direct financial losses. These consequences can only be avoided if legal safeguards are embedded at the contract stage: it is important to stipulate liability, penalties, and mechanisms to protect against breaches of obligations.

Analyzing accounts receivable is an essential tool for identifying problems on time and assessing the prospects for recovery. Such analysis involves classifying debts by maturity, identifying the largest debtors, monitoring trends, and evaluating the real quality of receivables. Equally important is ensuring that all debts are backed by proper documentation. If supporting documents are missing, it is advisable to consult a lawyer immediately, who can assess the prospects of litigation and gather alternative evidence.

Modern practice shows that a preventive approach is always more effective than dealing with the consequences. For this reason, businesses increasingly rely on compliance checks of counterparties, which include reviewing court records, financial reports, and reputational risks. Tools such as YouControl, Opendatabot, ContrAgent, and international systems like Sanctions Scanner are used to identify risks in advance and make informed decisions about cooperation.

When amicable methods fail, legal action becomes necessary. Court proceedings begin with preparing a claim in accordance with the Commercial Procedure Code, supported by contracts, acts, invoices, and bank statements. The statute of limitations for such cases is three years from the moment the obligation was breached. Once a favorable judgment is obtained, the matter shifts to enforcement proceedings.

The creditor may apply to the state enforcement service or engage a private bailiff. This stage is often fraught with difficulties as well — from formal refusals to open proceedings to the simple absence of debtor’s assets.

Managing accounts receivable requires a comprehensive approach that covers both legal and financial aspects. Only systematic work with contracts, counterparty due diligence, payment monitoring, and readiness to defend claims in court can minimize risks and safeguard the financial stability of a business.