Collect International Debt – 7 ways to make foreign customers pay

You know times are tough when you start spending your time on lawsuits to collect your invoices.  Over the last two years, I’ve had to beg, borrow and yes, sue to collect money owed to me by foreign customers.  It’s humiliating and a complete waste of time.  But it’s also a fact of life:
international accounts receivable demand a different collections strategy.

Collecting from international debtors involves not just distance and time zones, but also various legal and cultural differences that can hamper receivables collection.  Based on my bad experiences (and a few good ones) I’ve put together seven rules that can help you reduce the receivables risk when selling to foreign companies.

  1. Know before you go.  As in sports, the best defense is often a great offense.  Take the offensive by knowing who your customers are.  Start with a credit report from Coface.  For less than $200 you can avoid the embarrassment of invoicing a known fraudster, gangster or deadbeat.  International credit checks often reveal much more than you would expect, including names of directors and investors, revenue and capitalization values, and financial links to related companies.
  2.  Paper it up.  Not all industries or countries operate on paper contracts.  Don’t let that discourage you from getting the basic terms on paper.  A solid contract – reviewed by a competent US attorney – should help you now and later: In the short term, a contract should precisely define expectations such as price and payment terms; In the long term, if you are facing non-payment, a contract gives you something to present to a USA court.   More on that later.
  3. Build multiple relationships.   Contracts between strangers are not worth the ink used to write them.  Only good personal relationships can assure smooth transactions between companies that do not share a homeland.  The best relationships are top-to-top, but don’t forget accountant-to-accountant and salesman-to-buyer.  When it comes time to expedite payments or resolve disputes, having a well connected staff can make a big difference.  Do I need to say it? Don’t wait until there is a problem before your people speak to their people.
  4. Don’t Email.  If payments from an international customer start to slip don’t hide behind email.  Instead get on the phone and use those personal relationships you’ve built to get right to the heart of the problem.  As they say, “seek first to understand and then to be understood.”  Call your contacts and be prepared to listen patiently.
  5. Pull the plug.  International customers are more likely than most to take advantage of your good nature (or your sloppy collection practices).  If you have an account that is headed into arrears, don’t be afraid to pull the plug on further orders.  Stop providing service, hold further shipments, or move to a pre-payment requirement.  Often just the threat of a work-stoppage is enough to get their payments department moving, but be prepared to follow-through with your threats or demands (and meanwhile, keep communicating!).
  6. Release the Hounds.  If communication and diplomacy don’t get you anywhere, you’re in pretty deep.  Consider hiring someone to collect your international receivables.  Collectors range from simple calling services to private detectives to international lawyers.  Some operate for fees, others on contingency.  Coface, the same company that provides credit reports in #1 above, has an international collections department that operates on contingency.
  7. Sue.   Strange but true – twice in the last two years, foreign customers have told me POINT BLANK that they are “never going to pay”. They believed that their laws – and the thousands of miles between us – would protect them from recourse.  They were wrong, of course, and their brash statement gave me the green light to file a lawsuit.   Filing is neither difficult nor expensive (a few thousand dollars went a long way with a contingency-based law firm), but it requires strategy.  Deciding whether to file in your state, another state, federal court, or the courts of the customer’s country requires good legal counsel, and a heaping dose of patience – lawsuits can take months or years.

I usually bat about 80% — about 20% of my international accounts have gone into serious non-payment mode at one time or another.  But one or more of the 7 strategies above helped me solve the problem, and in some cases I have used these strategies to build long-lasting relationships – even friendships – with people all over the world.

The financial risk that comes with selling internationally is real – and really dangerous.  But careful planning and a willingness to act will help you collect international accounts receivable.
Dedicated to your (collected) profits,  David
PS: Need help collecting YOUR accounts receivable?  Call FUSE today!  704-614-2701

Originally Published

0 thoughts on “Collect International Debt – 7 ways to make foreign customers pay

  • ordered and paid down payment of aprox. 17000.00 with a promise to deliver within 1 month, many emails later ,nothing

    • David Worrell says:

      Hi Jack:
      This is an issue for a lawyer — suggest you find a firm that belongs to one of the international law networks. They will have people working in China who can track down your vendor and work out a solution. Try a medium sized law firm in your town first, then work up to larger national firms if you can’t find the right fit.
      Good luck.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes:

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>