Use of Enforcement Order in Practice

The starting point for the diploma thesis is the problem of non-payment of obligations upon their maturity. Unpaid or late paid receivables significantly affect the financial strength of a company. In the second part of the diploma thesis, they analysed the use of existing instruments for securing receivables in practice. They found that the percentage of secured receivables is very low. Given that the ** enforcement order** is new, practice has not yet developed.

Problem

The starting point for the diploma thesis is the problem of non-payment of obligations upon their maturity. Unpaid or late paid receivables significantly affect the financial strength of a company. Management of receivables must therefore be one of the priority tasks in every company.

In the first part of the diploma thesis, they presented the theoretical foundations of instruments for securing receivables. First, they discussed already established instruments for securing receivables: bill of exchange, pledge of real estate, movables or rights, insurance with an insurance company, factoring, cession, assignment and bank guarantee. Since 28 October 2012, the enforcement order has been in use on the basis of the Act on Prevention of Late Payments (ZpreZP-1).

This is a new instrument with which the legislator wanted to eliminate payment indiscipline.

Solution and Method

In the second part of the diploma thesis, they analysed the use of existing instruments for securing receivables in practice.

Results

They found that the percentage of secured receivables is very low. Given that the enforcement order is new, practice has not yet developed. They concluded the diploma thesis with a comparison of the advantages and possible disadvantages of the enforcement order with already established instruments for securing receivables.

They found that it has numerous advantages, which in their opinion will convince those responsible in companies to decide to use it.