International debt collection
Overdue payments are unpleasant enough. It is not easy to ensure payment from Belgian late payers. If your customer is across the border, arrears in invoices are especially challenging. You have less control of the payment behaviour of international customers as the distance, both literally and in terms of culture and customs, is much bigger. International debt collection through a specialist third party can help lubricate the recovery process.
Belgium is a net exporter
Belgium is a net exporter. During the crisis, our export rates plummeted. But in the past few years, the statistics gradually increased again. In 2014, Belgian exports amounted to over 350 billion euros. 70% of all exports were delivered to other countries within the European Union, with Germany, France and the Netherlands as the largest export partners. Chemicals and minerals are our top export products.
Economic success stories are often mostly written abroad. With the European Central Bank purchasing huge quantities of assets, the euro to dollar rate has significantly decreased. This is a windfall for exports. Some companies that may have felt in the past that sales abroad was too challenging, could benefit from today’s situation.
Simultaneously, trading with customers in other countries also involves a higher risk.
Do foreign customers pay correctly?
It is easier to keep a foreign supplier hanging on than a supplier with its office around the corner. According to Graydon’s export sector survey, 24% of all respondents indicate that the payment morale of international customers has declined during 2014. Only 7% of the companies have found an improvement in the payment morale.
The survey also indicated that almost half of all Belgian companies apply a 30-day payment term for international customers, and that only 17% actually comply with that payment term. So precautionary measures are certainly in order if you decide on doing business abroad.
Success with international debt collection
International debt collection can help you recover your money abroad. Speed in actions is crucial to success. A local intermediate can decrease the distance between you and the customer.
Your local representative also speaks the language and is well-versed in legislation, customs and culture in the relevant country. Working at a local level is therefore much more efficient. The customer will be inclined to pay only after efficient and effective communications. Local debt collection agencies use the same instruments as here in Belgium to urge your customer to pay. Reminders by telephone and in writing, while keeping an eye on the relationship with your customer.
We work with local partners, but Graydon will remain your point of contact in your own country. This way, you are assisted in your own language. That makes things clearer and easier. International debt collection agencies generally make use of an online system. This enables remote monitoring of the entire debt collection process: from the start to effective payment. Such an online system also gives you an insight into the progress and return on your foreign debt collection portfolio.
Which steps until your customer pays?
Each country has its own legal framework, but international debt collection generally follows a standard pattern.
Step 1. Negotiation to come to extrajudicial settlement
Settlement without recourse to the court remains essential. However difficult the negotiations, it will still be cheaper than starting up complex legal proceedings abroad. Therefore, foreign debt collection procedures tend to take longer than national procedures.
Step 2. Possible legal proceedings
If the extrajudicial approach is unsuccessful, legal proceedings may be the next step. First assess if the cost and effort justify the expected result.
Step 3. Result (or not)
Either the legal proceedings are successful and you recover your money - or you find out during the legal proceedings that the company is not solvent. If that is the case, the probability of recovery is slim.
If you want to start legal proceedings against a customer established in a different country, you are entering into the challenging world of international law. In particular, you will be confronted with questions relating to international procedural law.
- Which court is competent for the proceedings?
- How is the judgment served?
International debt collection is more complex if you nonetheless need to start legal proceedings. A local representative to defend your interests is not a luxury.
European payment summons
For cross-border amounts receivable within Europe, the claimant may also rely on the European payment summons. This allows you to start up a procedure in your own country. The enforced execution of the sentence relating to payment is then automatically started up in accordance with the local rules in the relevant country. This means it does not require confirmation from a local court. This procedure applies to claims that are payable without disputes. The single exception is Denmark.
The greater the distance to your customer, the higher the risk. Clearly, you have less control of international late payers. This is why thorough substantiation of your customer acceptance process is a crucial factor. This would apply both to Belgian and international customers.
The sector survey also showed that 47% of the companies saw growth opportunities abroad, forecasting a 20% or higher sales increase. It sounds great - but the way companies operate is a major concern. Blinded by the prospect of extra sales, the suppliers grant extensive credit without thorough advance enquiries. This means they have no insight into the risks, and may be late beyond rescue if having to implement last-minute measures for limiting overdue payment losses. This erodes their basis, jeopardising their very foundation that they often worked so hard to build up over the years.
If you want cross-border success, you need to have both feet on the ground and start with solid preparations. Checking the financial situation, payment behaviour and the reliability of a company should be an automatic, self-evident step. This applies to both Belgian and foreign customers. Additionally, staying alert and responding quickly is key as soon as an international customer does not fulfil its payment obligations.