The future of credit management

Strategies for Global Debt Collection

Of course, there are many factors that influence a debtor to pay money promptly. But when it comes to collecting money overseas, what strategies and protocols are important to apply to a collection program? In general terms, the global characteristics of debt collection is that it is highly fragmented, usually domestically focused and collection agencies have a poor reputation.

We have to understand each country’s collection culture and ´hot button and adapt our collection strategies and approach accordingly. How could there be any other way?

Here are some points that need to be considered when collecting money overseas:

1. The collection infrastructure of the country of the debtor: every country around the world has a different collection infrastructure and collection strategies should always be adapted to a particular country approach. Take Germany for example; excellent payment culture, directors personally liable for company debts, but legal action is slow and expensive and there is a 2-year statute of limitations unless judgment secured. Compared with Italy; where there is a regional variation in payment performance, an importance of social element business interactions, collection agencies and lawyers are used and the court system is very slow.

2. Local leverage; the fact that you are on the doorstep of the debtor, increases the leverage. Take Italy for example; whether you are collecting money in Rome or Reggio di Calabria, if you are local to your debtor, it has an impact on them and the collection success rate will improve.

3. The skill set and the cultural knowledge of the collection specialist: whoever collects your files should have a complete knowledge of language, culture and habits of your debtor. An insensitive or unprofessional approach will affect the collection result.

4. Collection momentum: It is vital to maintain a momentum to the collection program of overseas debts. Even if a promise of payment is not fulfilled, follow up and written confirmation of what happens next is vital. Whether the debtor has promised to call back or has ignored a request for payment, this still needs to be documented with the ´consequence´ of inactivity.

5. Credible third party impact: Is the debtor sufficiently motivated by your approach? What happens if you are ignored? Have you threatened a legal action that has been ignored? Does the debtor believe you are serious? Surely you wouldn’t threaten a legal approach if you knew that it will take at least two years to come to court?

Here are some examples of regional differences:

North America - Many small players per state or province – Excellent collection infrastructure – Debtors responsive to negotiation – Commission rates high

South America - Generally poor collection infrastructure – Importance of language – Face-to-face interaction common – Local agent or lawyer needed

EMEA Region - Major players in each country – Variable collection infrastructure – Many languages, legal systems, payment cultures – Wide variation in commission rates

Asia Region - Some regional players – Highly variable collection infrastructure – Importance of language and personal approach – Commission rates high

Partnering with HCM International will give you the best possible chance of recovering money overseas. Our global expertise will ensure that you get the best return on all your international debt collection files.