Promise To Pay
What is Promise To Pay?
Promise to pay refers to the agreement between lender and borrower to pay for goods on a certain date. If a borrower fails to repay a debt according to the terms of the promise-to-pay, the lender may take legal action to collect the debt. This can include garnishing wages, seizing assets, or taking other measures to recover the money owed.
What Does a Promise To Pay Include?
It typically includes the following elements:
Identification of the parties - It is important to clearly identify the parties involved in the agreement, which typically includes their names, addresses, and contact information
Amount and terms of payment - The amount of money owed, the due date or dates for payment, and any applicable interest or penalties that may be incurred for late payment.
Security or collateral - If the financial obligation is secured by collateral or other assets, the Promise to Pay should identify the collateral and outline the terms and conditions of its use.
Default and remedies - The Promise to Pay should specify the consequences of default, such as the accrual of additional interest or penalties, and outline the remedies available to the creditor in the event of default, such as the right to seize collateral or pursue legal action.
Governing law and jurisdiction - To ensure that both parties' rights and obligations are properly defined in the event of a dispute, the Promise to Pay should specify the governing law and jurisdiction for the agreement.
How to Collect a Promise To Pay?
The collections team should have a means of collecting Promise-to-Pays against invoices from the customers. The collectors can add the promised payment date for such accounts in the calendar and set reminders for themselves while classifying the account as ‘De-prioritized’ from the worklist. However, if a customer has broken a promise-to-pay that has failed to make payment by the promised payment date, it should be treated as an ‘At Risk account’ where the customer should be called on the same day and the account should be escalated internally
Uncover the leaks in account prioritization, which can inflate past-due A/R by 150%