Mexico is an emerging market and for many foreign companies it offers a wealth of opportunities to do business. But what you encounter payment issues with a Mexican client? What if a company in Mexico is not paying?
Check Your Files
First of all, check your files. Are you able to reach your client by phone and email? Dou you have cell phone numbers of the decision makers? Have you spoken with payment at the accounts payable, as well as people on the commercial side? Are all your internal sources exhausted and is your client in Mexico still not paying? Then make sure that you have a complete file, including paperwork, contact details and notes of actions taken, before you proceed with the next step.
Contact a Debt Collection Agency
The next step is to engage a debt collection agency who can service you in Mexico. This can be your local debt collection agency, if they have an international network that includes Mexico. An alternative is to contact a debt collection agency in Mexico directly. It is important that the Mexican agency has international experience, has a proven reputation and is able to communicate with you in English.
Assess your Leverage and Debt Collection Strategy for Mexico
Once a debt collection agency is engaged, it is important to assess together with them the leverage you have. Is the paperwork like contracts, invoices and correspondence, solid enough to potentially go legal in Mexico? Is the collection agency able to obtain information on size, payment behavior, legal status, and assets of the company in Mexico that is not paying? Is it possible to credit register the Mexican company? Does your commercial relationship with the Mexican company still exist, that is to say, are you still doing business with them? Based on this assessment, a debt collection strategy should be elaborated which includes focus (amicable or legal), time lines and reporting frequency.
Debt Collection in Mexico
And then the debt collection process in Mexico starts. In general, debt collection in Mexico on behalf of foreign creditors is different from local debt collection. Often, for example, it is complicated or practically impossible to go legal, which changes the nature of collections substantially. It is important to understand all the steps taken and considered, and to adjust your expectation management accordingly. Hopefully, the debt collection process will result in full payment of the outstanding amount, a reasonable payment plan, or at the very least a settlement with partial payment.
Learn from the Experience and Prepare for Next Time!
If not, let it not discourage you. There will be lessons to be learned from the experience. How did you end up with the company in Mexico not paying? Did you properly mitigate the credit risk? How was your due diligence process for this company in Mexico, and how is your due diligence process in general for foreign clients? Is your Know Your Client Policy up-to-date for Mexico? How is the internal communication between sales, client relationship management and account receivables management?
What to do if a Company in Mexico is Not Paying
If a company in Mexico is not paying, we suggest you follow the following steps: first, check your files and make sure you are fully up-to-date, then contact a debt collection agency, assess your leverage and debt collection strategy together with your debt collection agency, then start the debt collection process in Mexico, and finally, regardless of the outcome, learn from the experience and prepare for next time you doing business in Mexico.
Cobroamericas is a boutique service providers offering debt collection, credit consultancy and company research information services to international companies doing business in Latin America and the Caribbean.
To participate in the conversation about debt collection in Latin America please join the Linked-In Group Debt Collection Latin America.