Where the collection procedures are most complicated
Sweden, Germany and Switzerland are leading the way internationally when it comes to making collection procedures as streamlined as possible. Countries in the Middle East, Africa and Asia, on the other hand, have the most complicated collection procedures. However, despite good framework conditions in Switzerland, the advance payment of court costs is a major obstacle for many companies.
In its new study "Collection Complexity Score and Rating", credit insurer Euler Hermes shows how complicated it is to collect money for outstanding invoices in the world's 50 most important trading nations. To do so, Euler Hermes experts assessed the level of complexity of international debt collection procedures based on three main factors: payment practices, local court proceedings and insolvency procedures in the countries concerned. This results in a ranking designed to help companies navigate their international trade activities.
Local collection procedures nothing transferable to foreign countries
Although Switzerland ranks among the countries with the least uncertainty in the payment of receivables due, Swiss companies cannot transfer this framework to their foreign operations. Local law applies in collection procedures, which can differ significantly from Swiss practice.
Western European countries in the lead
With a global average score of 51 on a scale of 1 (no degree of complexity) to 100 (high degree of complexity), Western Europe tops the scale with the simplest collection procedures. Sweden, Germany and Ireland in particular have the lowest level of complexity, with scores of 30, 30 and 31 respectively. Sweden leads the ranking with the best payment practices, the simplest court procedure, and the most effective insolvency law.
In absolute and relative terms, Europe is home to most of the countries categorized by Euler Hermes as having the lowest collection complexity. 14 out of a total of 16 European countries surveyed are categorized as "less complex", while Greece and Italy are the exceptions with high collection complexity.
Legal costs in Switzerland: advance at the expense of the companies
The Euler Hermes study shows that the largest economies, the most dynamic markets and the most solid countries are not characterized by business-friendly conditions in all areas. There are also difficult aspects of the debt collection process in Switzerland. "Following the standardization of the Code of Civil Procedure, companies now have to advance the court costs. However, many SMEs cannot afford the high court costs and are therefore unable to enforce their rights," says Stefan Ruf, CEO of Euler Hermes Switzerland. This is particularly problematic for the large Swiss exporters, mostly medium-sized companies, according to the credit insurer. Unpaid invoices could quickly threaten the existence of such companies. "That's why a comprehensive assessment of the contractual partners from the outset is a more reliable basis than relying on standard dunning procedures - especially in countries with complex framework conditions," Ruf continues. And he notes, "Generally speaking, if the money hasn't arrived after 60 days, it's high time to call in debt collection experts with international experience." Depending on the canton, court costs can also vary greatly:
- Dispute value CHF 20,000: costs between 8,000-50,000
- Dispute value CHF 100,000: costs between 20,000-100,000
- Value in dispute CHF 1.5 million: 125,000-500,000
Bringing up the rear in debt collection: the Middle East
At the other end of the scale, the Middle Eastern countries Saudi Arabia and the United Arab Emirates rank as top performers in the complexity of debt collection procedures. With a score of 94, the international procedure in Saudi Arabia is three times as complicated as in Sweden. 78 out of 100 complexity points on the debt collection scale means third place for Malaysia, followed by China (73), Russia (72), Mexico (70), Indonesia and South Africa (67).
Source: www.eulerhermes.ch
