The calculation of the days of default has changed: previously, an invoice was considered overdue when more than 90 days had passed since its original due date (or other agreed dates).
The New Definition of Default instead considers the continuity of overdue period, so a status may become past due (with the rules defined above) even if there are no individual status that have expired or are overdue by more than 90 days, but because of several outstanding invoices whose sum of continuous overdue days is more than 90 days.
This is why it is very important for companies, clearly also based on their bargaining strength, to define the due dates of invoices according to their financial standing and programming.
Another key new element is the introduction of the 3-month observation period to go back to the performing status after being classified as past due, a period during which the other party must prove to be a good payer, i.e. regularly fulfil their financial commitments without delays.
As can be seen from this brief explanation, in some areas the New DOD is stricter compared to the past, but it can also offer opportunities to be seized in order to manage operations correctly and build a profitable commercial relationship with customers and the Bank.
Pasquale Naclerio, Major Risks and Monitoring Division Manager
With a degree in Business Economics from the University of Venice after previous experience as a freelancer and as a Credit Analyst in a credit insurance company, I joined Banca Ifis in 2002. I have always covered roles related to the assessment and management of receivables, mostly concerning debtors assigned in factoring operations. In June 2019, I was appointed as Major Risks and Monitoring Department Manager, coordinating the teams working on the assessment of assigned debtors and all transactions involving larger amounts, as well as monitoring the bank’s counterparties to help identify positions at risk and contain the cost of credit of the bank.
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