Settlement of overdue recievables in Small and Medium Enterprises in the Czech Republic

Abstract

The problem of irrecoverable receivables has to be solved by every company. Insolvency proceedings offer one possibility of handling this problem. The ever-increasing number of insolvency proceedings, caused in the present economic situation by the expansion of the financial crisis and partially due to a certain novelty of the Insolvency Act, provides adequate material for examining this problem. The following article concerns in its theoretical part the possible causes that lead company to bankruptcy, insolvency proceedings as such and also the evolution of the number of insolvency proposals in the past two years. The article aims to document the experiences of Czech creditors, especially from among the ranks of small and medium firms, with settling overdue receivables by means of insolvency proceedings. Their experiences were investigated with the aid of questionnaire surveys. Overdue receivables are registered by half of all respondents. However, only 5 % from the entire volume of receivables are settled by insolvency proceedings. In most cases, receivables amounting to small sums, i.e. up to CZK 50 thousand, were at issue. One surprising finding, however, was the low yield of receivables settled in insolvency proceedings, which do not correspond to statistics conducted by the World Bank.