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• Assignment of buyer’s own account receivables where 1. It prevents a business from maintaining adequate
debtor is short of cash because it is also owed money. cash flows.
• Distresseddebtsale–althoughthereturnislower,it 2. It incurs unnecessary costs in debt recovery
provides aroutetosalvagesomemoneyfromadebt action.
without wasting management time. 3. Business profitability levels are threatened.
• Countertradeexchangingamoneydebtforgoods or
services or ‘Debt for equity’ swap. Putting pressure on the debtor
(Important note: thepolicyholdercanshareinthe There are a variety of methods to put pressure on
UHFRYHULHVDIWHUWKHFODLPLVSDLG the debtor, according to your needs, ranging from
early collections to legal collections. By partnering
Credit Insurance – Example of Claim Calculation: with a debt collection agency you can determine
what needs to be done and set up an international
strategy to centralise/decentralise the debt collection
Amount owing by the buyer at activities. The amicable collection route should
thedateoflossor always be the preferred option; however, taking legal
the value of the credit limit action is sometimes required. In either case, the key
ZKLFKHYHU LV WKH ORZHU is to respect local ethics and the law. Only with local
expertise can businesses ensure they are following a
,QGHPQLW\ ,QVROYHQF\ professional and successful path to collection.
________
$90,000 Working with an international collections
agency
Firstlossexcess –$5,000 You may want to remain on good terms with the
Deduct any credits buyer to do future business. A good collection agent
FUHGLW QRWHV DJHQW¶V FRPPLVVLRQ ± should apply the right amount of pressure on the
________ buyer without harming the business relationship.
Claim payment $83,000 The reputation of the collection company can add an
extra level of encouragement for a debtor to pay.
Aclaimpaymentisusuallyapercentageoflossor By outsourcing collections you will be relieved
thecreditlimit,whicheverislower.Hence, ifthe of the burden of finding a local agency that
credit limit is $80,000, then in the above example the you are confident with in the city of the debtor.
amount owing to start the calculation is reduced to An international debt collection agency will
$80,000. typically have an extensive network of collectors
with knowledge of the collections norms and
requirements, increasing your chances of success.
Debt Collection The local people are able to communicate in the
No business is immune from international trade risk, language of the debtor. The company will know the
especially the exposure to bad debt. signs that the buyer is likely to pay, or is not even
Larger businesses can be particularly exposed able to pay at all, thereby mitigating risk.
to erratic payment behaviour on account of the International debt collection agencies can save
higher volume of their international transactions. you time, money and increase success rates while
Even smaller businesses learn the hard way from at the same time keeping you informed about
incorrectly assessing their international business collection case progress every step of the way.
partners’ ability to pay on time.
Approximately one third of the value of invoices For more information contact
that go uncollected after 90 days ‘past due’ are Farook.Mohammed@atradius.com or
never paid. So maintaining and protecting cashflow +64 9 526 0012
is crucial for all businesses. The longer a debt is not
pursued, the lower the chances of recovery.
+64 9 526 0012
Unpaid debt will have an impact on businesses in
www.atradius.co.nz
three ways:
74 NZ Export & Trade Handbook 2018