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7 Aggressive Tactics to Keep International Accounts Paying in Full & on Time
 

IOMA

From the March 2000 edition of Managing Exports

Keeping an international customer paying on time can be a daunting process, given that it involves dealing with cultural differences, unfamiliar legal issues, and language barriers. To help you in this task, MICC spoke with a group of experts who offered up the following seven "tough" tactics:

  1. Refuse to ship. One company refuses to ship new product to any customer, no matter how big, once an account goes more than 45 days past due. The credit director at this company says there have been a few "interesting" confrontations with sales over this approach but that management is firmly behind him. He says that he got this support because his company got stuck for six figures on a transaction when sales had management override credit's decision not to ship. On that particular transaction, the vice president who made the decision told the sales manager that "the customer had better pay or there will be repercussions!"
  2. Customer visits. Once there is some personal relationship between the credit manager and the customer, refusing payment is more difficult for the customer. Numerous credit professionals have told MICC that the best way they know to cement their relationships is through customer visits. While making these trips to see international customers is more time consuming and costly, they are still one of the best investments an international credit professional can make.
  3. Correspond in their language. Some of the collection problems that international credit professionals encounter are simply misunderstandings. This happens all too frequently when dealing with a customer who speaks another language. We all assume that everyone else speaks English, and in many cases, that is true. However, often the customer's knowledge of English is limited, and a misunderstanding results that causes a late payment, or worse. Several international credit professionals report that they have cleared up such problems by simply having all written correspondence translated into their customers' native language. They say that in addition to avoiding the problems mentioned above, the customers appreciate the thoughtfulness of such actions. Now some may read this and think, "my company would never pay for this." The Internet has made simple translations inexpensive or even free. Two good Web sites are worldblaze.com and babelfish.altavista.digital.com.
  4. Tough love. Sometimes, when all your previous actions have failed, taking a tough stance is necessary-unless your company is willing to live with consistent late payments. This may mean cutting the customer's line of credit, taking them off open account and switching them to sight draft or letter of credit, or worse, insisting on cash in advance.
  5. An ounce of prevention. By paying attention to major accounts before they go bad, the international credit professional avoids having to deal with the unpleasantness that results when a customer does not pay. Continually investing time will pay off when the customer regularly remits on time.
  6. Don't let them develop bad habits. One very successful manager puts all new accounts on credit hold the minute they go past due. When questioned about this harsh response, he says that he lets new customers know he means business when it comes to timely payment. Since this company is the 800-pound gorilla in its market, it can get away with this strategy. However, it might not work for all companies, and credit pros are advised to make sure that management is with them before trying this strategy.
  7. Hire a local attorney. Occasionally, international credit professionals realize that they are never going to collect monies owed from a certain customer. Even though the company has not shipped additional goods, it is still out the money from earlier orders. Since future business with this particular customer is not a concern, it is time to bring in the big guns and call in local collection talent. Usually this means hiring a collection attorney in the debtor's country. Hiring local attorneys is recommended because they have a better command of local laws and may know some of the court officials. In a few cases, they may even be able to coerce payment without using the courts, a last-ditch effort that is employed if significant money is involved, since there can be costs associated with initiating such legal action.

While it is hoped that the strategies discussed above are never used, the hard reality of an international credit manager's life is that at one time or another an account won't pay. Using the techniques discussed above increases the chances of turning those collection failures into successes and ongoing profitable accounts.

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