Selling products/services on credit is a common practice for a business to reduce transactional costs and encourage sales.

Inevitably, it also generates the risk of overdue payments and eventually bad debts, burdening the cashflow cycle and compromising the business’s financial wellbeing.

Thus, recovering debt effectively and efficiently is not a negligible component.

What is delinquent debt?

Technically speaking, the law enables the creditor to take legal action against the debtor after passing settlement for 15 days.

However, there seems to be a sentiment gap between the friendly “payment reminder” emails and a cold harsh attorney letter.

What to do with delinquent debts? A non-litigation approach to debt recovery

The issue of overdue payment might require a management discussion from both sides to resolve – taking drastic actions are likely to burn the bridge with the client.

Not to mention litigation is an expensive route: the process is complicated, time-consuming with more billable lawyer hours and no guaranteed success.

Especially for SMEs, there is a higher possibility that the debt amount might not be even worth fighting for considering the cost of hiring a lawyer.

Understood the dilemma, STAR Accounting is providing an alternative and softer approach in collecting delinquent debt by carrying out the Non-litigation Debt Recovery Service, partnering up with lawyers with extensive experience and credentials on debt disputes. It allows a buffer before the official legal action against the debtor firm.

Non-litigation Recovery Approach: How does it work?

Lawyers, with their expertise, are in a better position and stand a higher chance in debt recovery than the creditor itself or a third party. The recovery mediation process not only enables a more elegant way in the collection but also allows the lawyer to take necessary steps, put all relevant documents in place to increase the winning chance when the time comes.


Collect information from creditors including contract, fapiao, payment status, product delivered, and correspondence regarding the outstanding bills.


Upon receiving all relevant information, a comprehensive analysis (on legal relations, credit stands of the debtor, and related aspects) will be conducted by lawyers. The lawyer will advise on the success rate on debt recovery or whether the proposed solution by the creditor stands on solid legal ground. Additional evidence or information will be collected accordingly to better prepare for the potential arbitration/litigation.


The lawyer will get in touch with the debtor firm on behalf of the client to understand the reason for overdue payments.

For those with financial difficulties and willing to cooperate, we will request a detailed repayment schedule and a letter of commitment from them, followed by subsequent regular phone calls.

For debtors who exhibit no willingness to settle, the lawyer will proceed to draft the attorney letter with follow-up calls. The goal is to recover the debt without going to court and the team will spare no effort to resolve the issue at this stage.


With all the prior steps carried out and unsuccessful debt recovery, the lawyer team will draft a debt collection plan for the arbitration process or prepare for litigation. Obtaining the repayment plan from the debtor, delivering a letter of attorney to the debtor in the prior steps will increase the chance of winning.

Before getting lawyers involved: Monitor Account Receivable (AR)

In accounting terms, Accounts Receivable measures the number of money clients owe to the business for the goods/services already provided. AR is usually the first place reflecting the risk of a delinquent debt. Monitoring the total number of AR, analyzing the figure on each client account alongside the debt age will provide insight into how likely the money will eventually be collected.

To read our previous blog post explaining Account Receivable in detail, please click here.

Properly monitoring AR is a crucial component of mitigating risk, while keeping track of the receivable accounts, following up accordingly with each client could be time-consuming. Who will be better to manage your Account Receivable than your accountants/advisors in China?

Committed to being the most trusted advisor for foreign businesses in navigating the Chinese market, STAR Accounting will assist you with Account Receivable Analysis, aged receivable report, payment correspondence, and everything related.

For more information on Account Receivable management and Non-litigation recovery service, please contact Nancy Chen at [email protected]


Blog articles and other related content are the intellectual property of Star (Shanghai) Accounting & Consulting Co., Ltd. Reproduction in any form partially or in full without formal consent will be regarded as plagiarism.