In a global economy, companies that do business abroad will inevitably run into a situation whereby clients do not pay. Those companies generally look for assistance with international debt collection. Often there is an existing relationship with a local debt collection agency, and this agency will use its network to try to collect their outstanding debt abroad. Sometimes, a foreign debt collection agency is hired directly to deal with the cross-border claim.
Before starting international debt collection, the debt collection agency should ask the creditor the following four questions – and in order to answer them, the creditor will need the expertise, experience and know-how of their debt collection agency.
Why is the Claim Unpaid?
It is essential to determine the reason(s) why the debtor does not pay the outstanding debt. Does the debtor have financial issues? And if so, how deep are the problems? If there are no financial issues, is there may be an issue with the delivered products or the services that were provided? If this is the case, can the creditor offer solutions? Or are there other reasons why the debtor is not paying?
Does the Creditor Perceive Willingness to Solve?
This question relates to the previous one. Is there is a willingness on the debtor’s end to look together for a solution? If the problem is financial, is the debtor willing to discuss a payment plan or a settlement, or a combination? If the unpaid debt has got to do with product or service-related issues, is the debtor prepared to discuss return of goods, repair, partial compensation or a discount, or additional assistance in the case of servicing issues?
What is the Leverage the Creditor has?
Before setting out a strategy, it is important for the creditor and the debt collection agency, to understand the context. What leverage does the creditor have? The answer depends very much on the size of the claim, the location of the debtor, the commercial relationship (is there still a relationship or was it terminated?), and the potential legal options. Once the creditor has a full understanding of the leverage, a proper negotiation strategy can be elaborated.
What Cost is the Creditor Prepared to Pay?
The final question relates to the costs involved with international debt collection, and what the cost is the creditor is prepared to pay. The answer to the question what the costs will be, depends on the age and size of the claim, the location of the debtor, and if the strategy will entail an amicable approach or legal proceedings. When it is clear what the potential costs would be, and how much the creditor is prepared to pay, the debt collection strategy can be adjusted accordingly. As at the end of the day, international debt collection is all about the economic benefit and keeping the costs for the creditor as low as possible.
Before a debt collection agency starts international debt collection, the creditor should be asked the following four questions: why is the international claim unpaid, does the creditor perceive willingness on the debtor’s end to solve the claim, what is the leverage the creditor has, and what will it will cost the creditor to recover the debt?
If you want to know more about international debt collection in general, and debt collection in Latin America and the Caribbean in particular, please reach out to Cobroamericas, on Linked-In or follow us on Twitter.
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