Common Mistakes That Cause Businesses to Fail in Year-End Debt Recovery

In the context of increasingly complex business activities, year-end debt collection has become one of the top priorities of businesses. However, there are Common Mistakes That Cause Businesses to Fail in Year-End Debt Recovery. These mistakes not only lead to financial losses but can also result in legal disputes, damage to reputation, and missed cooperation opportunities. To help businesses better understand these common pitfalls, this article provides a comprehensive and in-depth analysis of their causes, consequences, and practical solutions based on current Vietnamese laws.

The demand for year-end debt recovery

At the end of the year, businesses often face significant financial pressure as they must pay salaries, year-end bonuses, taxes, and prepare working capital for the new year. Consequently, year-end debt recovery becomes an urgent need to ensure cash flow stability and maintain continuous business operations.

In reality, many businesses struggle with delayed payments, prolonged debts, or intentional non-performance by clients. This not only affects liquidity but also disrupts investment plans and puts stress on the entire financial system.

Establishing an effective year-end debt recovery strategy with a clear, lawful process enables businesses to manage debts efficiently, minimise disputes, protect their reputation, and preserve long-term partnerships. This is the key step for any business to enter the new year with a strong and proactive financial foundation.

Common Mistakes That Cause Businesses to Fail in Year-End Debt Recovery

Lack of supporting evidence during the debt recovery proces

One of the Common Mistakes That Cause Businesses to Fail in Year-End Debt Recovery is attempting to recover debts without sufficient evidence proving the debtor’s payment obligation. Many businesses rely solely on verbal agreements, delivery notes, or email exchanges without having properly signed contracts, invoices, delivery receipts, or written confirmations of debt.

This makes the debt recovery process reactive and weakens the business’s negotiating position when requesting payment or initiating legal action.

To ensure lawful and effective year-end debt recovery, businesses should prepare a complete set of documents, including the sales contract and its appendices, VAT invoices, delivery receipts, acceptance minutes, payment requests, reconciliation statements, and other written confirmations bearing valid signatures and seals.

If documents are missing or inconsistent, a supplementary debt confirmation record should be created, specifying the remaining amount, payment deadline, and reasons for delay, and signed by both parties. Such evidence not only supports litigation if required but also serves as a solid basis for negotiation.

Applying unlawful debt recovery methods

One of the Common Mistakes That Cause Businesses to Fail in Year-End Debt Recovery methods such as posting debtor information, emotionally pressuring or threatening debtors. Although the goal of businesses is to quickly recover debts, these acts are illegal[1]. The application of illegal collection measures by enterprises not only causes debt collection to fail but can also seriously damage the reputation of the business. Therefore, to avoid common mistakes in debt collection, businesses should follow the standard process: Debt Determination – Reminder – Negotiation – Final Notification – Initiation of Lawsuit.

Failing to categorise debts and applying inappropriate recovery methods

Businesses often apply the same method to all debts, regardless of whether it is due, overdue, or bad debt, making the debt collection process inefficient. To avoid Common Mistakes That Cause Businesses to Fail in Year-End Debt Recovery, businesses should group debts as follows: Debts due – priority is given to debt reminders, notices and negotiations; Overdue debts – a formal payment request letter, a warning of legal consequences is required; Bad debts – consider the measure of initiating a lawsuit. Accurate debt classification helps businesses choose the right debt collection method, both saving time and limiting legal risks. This is an important factor to avoid failure in debt collection at the end of the year due to the application of wrong debt collection methods and measures.

Lack of negotiation and negotiation skills with the debtor

Businesses often only focus on debt collection without finding out the cause of the debtor’s late payment. As a result, the negotiation and negotiation process became tense, causing a breakdown in cooperation between the two sides. To avoid Common Mistakes That Cause Businesses to Fail in Year-End Debt Recovery, businesses need to apply flexible negotiation strategies such as respecting and listening to partners’ difficulties; proposing flexible options such as dividing the debt or extending the payment period (if it does not affect the business). In addition, businesses should classify debtors according to the level of cooperation to choose the appropriate approach. With the debtor in good faith, it is possible to maintain regular communication and create a reasonable payment route. For debtors who lack cooperation, it is necessary to send an official notice as a basis before applying stronger measures. After negotiation and negotiation, the enterprise should make a record of negotiation or make an appendix to the contract, which must be signed and stamped by the parties. This will be an important legal evidence in case a dispute arises later and the business must choose to collect the debt legally.

When the negotiation and negotiation process is conducted professionally, with a legal basis, maintaining grounds and good faith, businesses not only increase their ability to recover debts at the end of the year, but also maintain their reputation, commercial relationships and minimize legal risks arising. On the contrary, lack of handling skills in the negotiation stage is often an indirect cause of enterprises failing to recover debts at the end of the year, both losing capital and seriously affecting the reputation and reputation of the business.

Incomplete legal documentation before initiating a lawsuit

When the enterprise has made efforts to remind, negotiate and negotiate with the debtor but still cannot successfully recover the debt, filing a lawsuit is the last measure the business can choose. However, one of the Common Mistakes That Cause Businesses to Fail in Year-End Debt Recovery is filing a lawsuit without preparing enough legal documents to accompany it. Normally, the lawsuit dossier needs to include: Contract; Delivery documents, invoices, payment request letters, debt reconciliation records and documents proving the legal status of the enterprise, such as business registration certificates, investment certificates. The lack of documents will lead to the court requesting the enterprise to file additional submissions, prolonging the time to handle the case. To avoid this situation, it is necessary to make a list of documents, make certified copies and arrange them logically in the order in which payment obligations arise to ensure that documents are not missed.

Overlooking the enforcement stage after obtaining a court judgment

Many businesses think that when the judgment takes effect, the case is over, but in fact, the business is only halfway through the debt recovery process. One of the Common Mistakes That Cause Businesses to Fail in Year-End Debt Recovery is not continuing to monitor the judgment enforcement period. According to the law, enterprises have the right to request judgment enforcement within 5 years[2]. However, if the business fails to timely file or monitor the progress, the debtor’s assets may be dispersed, making debt collection impossible. Therefore, enterprises need to proactively request judgment enforcement agencies, coordinate to provide information, supervise and request the application of coercive measures when necessary. This is an important step to avoid failure in debt collection even though the business has won the lawsuit.

In conclusion, to limit Common Mistakes That Cause Businesses to Fail in Year-End Debt Recovery, businesses should develop a professional debt collection strategy, comply with the law and have the support of experts. Specifically: (i) Regularly monitor debts, reconcile periodically, do not accumulate debts until the end of the year, proactively build a strict internal debt management process, including classifying customers according to risk level, stipulating maximum credit terms, and establishing an early warning system when there are signs of late payment.; (ii) Drafting a clear contract, specifying the interest rate, term and penalty for late payment; (iii) Archiving documents, minutes and letters requesting full payment; Implement the goodwill negotiation process before initiating a lawsuit; (iv) Consult a lawyer or legal consultant to ensure that debt collection steps are carried out in accordance with the law, minimizing legal risks and disputes arising.

The above is an overview of Common Mistakes That Cause Businesses to Fail in Year-End Debt Recovery. If you have difficulties in finding a Law Firm to advise and support in the relevant legal field, please contact us. Phuoc & Partners is a professional consulting firm established in Vietnam and currently has nearly 100 members working in three offices in Ho Chi Minh City, Hanoi and Danang. Phuoc & Partners is also rated as one of the leading consulting firms in Vietnam with highly specialised teams in top legal fields such as Labour and Employment, Taxation, Merger and acquisition, Litigation. We are confident in providing customers with optimal and effective service.

[1] Article 38 of the Civil Code 2015; Article 7.3(a), Article 4.2 of Decree 144/2021/ND-CP

[2] Article 7.1(a), Article 30.1 of the Law on Enforcement of Civil Judgments 2008 (amended and supplemented in 2024)