South America Debt Recovery: Solutions

In a previous post we discussed common issues one runs into while attempting to collect a debt in South America. Common issues include financial issues and insolvency, disputes and misunderstanding, incompatible paperwork, currency exchange controls, lack of leverage, communication, unprofessional behavior, and unfamiliarity.

In this post we will discuss some of the solutions to these issues.

Proper timing for accounts receivable management and debt collection

debt recovery south americaOne of the solutions for the issues mentioned for debt recovery in South America is proper timing for account receivables management and debt collection. Often, businesses decide to take action when it is too late: months pass by before follow up letters or emails are sent, or telephone calls are done to the client, and before the account is considered in default. It can even take years before a debt collection agency is engaged. In those years, debtor may have started to feel it can get away with not paying, or debtor may even be bankrupt or not exist anymore, which means in practice a certain write off of the outstanding debt. The golden rule of thumb in debt collection is that the longer you wait, the less likely it becomes you will collect your debt. For debt recovery in South America, the rules are no different. By sticking to proper timing in the entire accounts receivable management and collections process, you will increase the likelihood of recovering international debts in South America.

Engagement of a local debt collector in the debt recovery process

We discussed the engagement of local representatives before; even in the age of technology and where distances seemingly do not play a major role anymore, in order to successfully collect a debt in South America, it remains vital to engage a debt collection agency that has local presence, either through its own branches, or affiliates, partners or professional networks. Reasons are the leverage you may have towards debtor to take legal steps locally if necessary, but also the knowledge of your local debt collector of local business culture, habits and procedures. And in South America, where businesses are often aware of the apparent inaccessibility of local legal systems for foreign creditors, it is important that your debtor realizes that you work with local debt collection experts.

Synchronization of paperwork in line with local standards

debt recovery south america contractTo make sure that your paperwork (contract, order forms, order confirmations, invoicing) is in line with local standards in South America, not only means that you build up a legally proper file in the case of legal proceedings locally in South America. Most of all, it shows towards your client and possibly future debtor that you understanding the local habits and procedures. You will comply with what your client’s administration and due diligence requires, and it will give you the leverage of being taken seriously by your counterpart in South America.

Commercial involvement in debt recovery in South America

I realize this depends on the size of your business and your market volume in South America. However, as a matter of principle, if your business is located in North America, Europe or Asia, physically and culturally perhaps far away from your clients in South America, you should always consider having a local commercial representative. And in order to create a successful South American market for your business, your commercial representatives should be involved beyond looking for leads, prospects and clients. They should also assist in setting up proper collections procedures and paperwork in line with local requirements. Commercial representation and credit management for your business in South America should go hand in hand.

Debt recovery in South America

Solutions for debt recovery issues in South America may include: proper timing for accounts receivable management and collections, engagement of a local debt collector in the debt recovery process, synchronization of paperwork in line with local standards, and commercial involvement in debt recovery in South America.

If you are interested in learning more or discussing issues that rise when attempting to collect an international debt in South America, or in general you would like to know more about debt collection in Latin America & the Caribbean, please connect with Cobroamericas on Linked-In or follow us on Twitter.

To participate in the conversation about debt collection in Latin America please join the Linked-In Group Debt Collection Latin America.

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