International debt collection: When customers abroad do not pay
The longer a creditor waits to collect the receivable, the greater the risk that he will never succeed. In international receivables management in particular, several successive steps are therefore necessary.
The Swiss trading company Optiremo AG (company fictitious) has recently started to distribute its products from the medical, measurement, control and optics technology worldwide. CEO Florian Kälin now also maintains good contacts in China and was recently even able to win a customer for a large delivery of industrial pressure measuring instruments. However, the customer has not yet paid his invoice. Florian Kälin is therefore asking himself how he can reduce the risk for his company and what he can do to ensure payment transactions. "Often, external influences such as the economic situation, prevailing customs, language and generally the communication between two business partners affect payment morale," says Pance Antevski, Team Leader International Service Line at Intrum Justitia Ltd. "Moreover, since laws differ from country to country, collecting international receivables not an easy task." After all, if international or bilateral agreements are in place, this reduces the risk of payment defaults.
Recommended procedure for receivables management abroad
What precautions should companies take before starting international activities to prevent reminders and debt collection abroad?
- Avoid particularly risky, unstable regions and countries.
- Make sure that the business partner is a member of a national trade association.
- When signing a contract, make sure the terms and conditions are clear.
- Agree in the GTC/contract that Swiss law applies and the place of jurisdiction is in Switzerland. If this is not possible, then agree on an international arbitration.
- Find out about the financial situation of the future contract partner.
- Get as much contact information about the business partner as possible.
- Clarify whether the negotiating party may actually make decisions on behalf of the company.
Course of action in case of late payment...
In this case, the delay in payment has already occurred. Pance Antevski: "Florian Kälin should therefore contact the customer within a short period of time and clarify why the invoice has not been paid. If he cannot clarify this within 30 days or if the contractual partner does not give a clear answer, he should look into the idea of handing the case over to a specialized company for international debt collection with local representation. In doing so, it is crucial that Optiremo AG provides as much information and documentation as possible."
... and after the case opening
Optiremo AG wants to enforce payment by means of international receivables management. Therefore, the debt collection provider first transfers the case to its representation in China. "Our locally stationed employees, who are very familiar with the national conditions, endeavor to obtain the realization of the claim within 60 days by taking pre-legal collection steps," emphasizes Pance Antevski. If within this period it turns out that the claim is disputed and no agreement can be reached, it will notify Optiremo AG of a recommendation with the next (legal) steps.
International debt collection: important facts in brief
- Is international debt collection expensive? Pre-legal collection by Intrum Justitia AG usually incurs no or only minimal costs. All further steps that may incur additional costs are communicated to the client in advance and are only carried out after the client's consent. Thus, cost transparency is always available for the company placing the order. Only in the case of successful international receivables management does the customer pay the agreed commission.
- How long does such a process take? The duration of the process is individual and depends on the complexity of the case. Added to this is the varying efficiency of the courts in the respective country.
Contact for more information:
Intrum Justitia AG, sales.ch@intrum.ch, +41 44 806 85 57
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