Doing business in emerging markets requires a basic understanding of the countries your clients are based in.
Latin America is very diverse and offers business opportunities and challenges, which differ per country. Uruguay is different from Mexico, Chile is an open economy and Argentina and Brazil have foreign currency exchange restrictions, for example.
If you wish to avoid uncollectible receivables in Latin America, here are five topics you should focus your attention on.
Your “know your client policy” for Latin America
First of all, know the people and the companies you are doing business with. Where are your clients based? What is their business track record? Can you get referrals on them? What is their financial status and their commercial reputation, locally and internationally?
Legal context: contracts and other documents
The next step is to understand the legal context. How do contracts and other documents, like order forms, certificates and licenses work? Which are the requirements to make sure that these documents, which may be entered into between companies from different countries, have legal value in the country your client is based in? The assessment hereof may vary substantially per country in Latin America.
Invoicing requirements in Latin American countries
When you start to do business, and invoices need to be issued, it is of the utmost importance for you to understand the invoicing process as applicable in Latin American countries. There may be specific local requirements to make invoices legally valid. Also, your client in Latin America may, for tax reasons, may require specific formats for invoicing to be able to process and pay invoices.
Understand payment processes in Latin America
For an effective account receivables management in Latin America, you should understand local payment processes. Such payment processes may vary per country or region, and each company may have their own specifics. Generally speaking, payment processes may be subject to tax requirements, foreign currency exchange issues, short term or long-term economic circumstances, and administrative requirements imposed by law.
Correspondence and communication
How do you correspond and communicate with your clients in Latin America prior and during account receivables management? Which are the local habits? Do people generally communicate by phone, email or WhatsApp? Are there any recommendations from an administrative or legal point of view, to prevent receivables from becoming uncollectible in the future? Are original letters (still) required for formal notifications? What are the socially acceptable standards of professional communication in the countries of your clients?
Local support in Latin America
Will you be able to tap into local support in Latin America in case necessary? Any such necessity may be related to commercial representation, business consultation, due diligence, administrative follow up, account receivables management, debt collection or legal assistance.
Six topics I am brining up to prevent receivables from becoming uncollectible in Latin America are: your “know your client policy”, local legal context for contracts and other documents, the invoicing standards in Latin America, understanding local payment processes, standards for correspondence and communication with your clients, and establishment of local support in Latin America.
To participate in conversations about debt collection in Latin America please join the Linked-In Group Debt Collection Latin America.