Magazine article Business Credit

Collecting from Debtors in Asia

Magazine article Business Credit

Collecting from Debtors in Asia

Article excerpt

According to the U.S. Department of Commerce's International Trade Administration, of the top 30 countries for U.S. exports, 10 were from East Asia. In 2007, these countries bought $285 billion in U.S. exports, a 39% increase from 2002. As more and more U.S. companies do business with Asia, especially China, India and Southeast Asia, it's important that we understand how to collect from them.

Here are some collection tips I have gained from doing business on this side of the Pacific. If you plan on extending credit to Asian companies, already have some delinquent invoices or you're simply curious about collection techniques in different countries, then please read on.

Asians are more formal. In America, collectors are taught to build bridges with customers to understand their problems and hopefully get our bills higher up on their bills-to-be-paid pile. Don't do that here. If your collectors immediately try to become too inquisitive or informal with their Asian counterparts, mey will raise alarms. It takes time to build relationships. Speak with formality. It builds respect and credibility over here. Avoid using names without a Mr. or Ms. When in doubt, go formal.

Gifts work wonders. Small tokens of appreciation for getting your payment out or clearing up a messy account are well-received. Asians look at not just the gift, but the effort that you took to send it. Gifts from your hometown work best.

Letters of recommendation. In the 13 years I've lived here I have seen less than five. Writing a letter commending your Asian A/P contact to his/her boss will be a pleasant shock. It will help get your bills paid faster. As a collection manager, I would even call my top collectors' families to express how proud they should feel of their son/daughter. It made a huge impact on the employee.

Beware of payment promise words like "try," "maybe," "see what I can do," "hopefully," "soon," "ASAP" and "most likely." These have an entirely different meaning here than back in the U.S. Here they usually mean, "We can't pay" Whenever you get a fuzzy payment promise, appreciate the debtor for giving it but express that you need to know how much will be paid and when.

Beware of extending large credit lines early. In most of Asia, the credit bureaus and legal systems are undeveloped. It's difficult to do extensive company checks. But it's easy to set companies up. As a result, there are a lot of "fly by night" companies mat commit fraud then disappear. Business is done on relationships and relationships take time to build. Paper contracts are less important here.

Visit your clients (if possible). It means a lot to them and it also gives them face when a Westerner visits them. For better or worse, the West is generally looked as highly-advanced. For many Asians, the goal in life is for their children to attend an American university since that is the center of world learning.

Have a tighter collection treatment for your Asian accounts versus your North American accounts. Companies that pay promptly here are the exception, not the rule. Loosen your credit/collection treatments once you've established a good relationship. Paying slow isn't looked upon as derogatory behavior. It's considered normal. Bad debt levels are higher here than in the U.S.

Know your A/P counterpart's boss. Asia is an extremely hierarchical society. Bosses are looked upon as famers/ mothers. Advising an A/P clerk that you will need to highlight a non-payment issue to his/her boss makes a much stronger impact here than in the U. …

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