Magazine article Business Credit

Collecting Foreign Trade Debt

Magazine article Business Credit

Collecting Foreign Trade Debt

Article excerpt

Collecting past due business debt is almost always challenging, but trying to collect business debt in a foreign country can give new meaning to the word "challenging."

Early in my career, I gained experience in international credit management and debt collection. A good part of my energy and resources had been focused on foreign debt collection. Over the years, we have increased our knowledge of foreign debt collection techniques, and when we weren't able to collection we usually learned something. I would like to share some of those learned lessons with you.

Let's begin with the concept that, initially, you do not have to fully understand the innermost workings of every single country in the world. You can begin by understanding the similarities of countries that share certain characteristics, such as geographical area, common language or something else that groups them together. For example, the Scandinavian countries have many similarities in business practices, laws, cultural customs and history. The same type of grouping can be done for Latin American countries, English-speaking countries, Mediterranean countries and so on. Of course, once you are confronted with a debt collection "opportunity" in a specific country, you need to know exactly how to collect a debt in that country and how to get your money out of that country.

For example, in Belgium, if an invoice is not disputed when it is received, it is considered more or less accepted. The debtor will then have difficulty disputing the invoices later on. If you are trying to collect a debt in Belgium, you should be familiar with this concept.

Another important point to recognize is that you should stop trying to equate the way business is done in the United States with country "X". Your debtor is in a different country with different business practices and laws.

I realize that very often, the credit executive is not always in a position to fully control the granting of credit and the collection of a debt until it is too late. Many times, credit for a foreign customer is approved over the objections of the credit manager, either because sufficient credit information is not available and/or the information obtained doesn't support the exposure. Collection of the debt can be delayed because someone in management continues to tell you, "Don't worry," insisting that "they always paid in the past" or "we need them in that sales territory" or "they will pay as soon as they get out of jail". Eventually, the debt is dumped in the lap of the credit manager, usually with some profound statement like "We think this guy is in trouble so you better collect this debt right away." Therefore, I understand that the information and the approaches I suggest cannot always be utilized by the credit controller because of circumstances beyond their control. However, it is my hope that you will gain sufficient information to implement ideas when and where you can.

When approaching the collection of business debts in a foreign country, we try to understand the creditor's industry and the characteristics of the debtor so that we can develop a successful collection approach can be developed. The method of analysis for the collection of foreign debt has developed into the following system that we call the "Four Cs" approach to international debt collection: Country, Creativity, Connections and Confusing.

It would seem that the average international credit controller would find Country and Creativity to be the most helpful. In addition to these two, Connections should be heavily relied on.


Understand the debtor's country from both the financial and business practices view and understand its culture. For example, in some Latin American countries, if you are selling on open account without any documentary instrument, you first have to go to court to prove that a debt exists and then go back to court and "resue" to collect the debt. …

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