Dean Kaplan is president of The Kaplan Group. He writes about business debt collection & contract negotiations & provides financial advice.
U.S. businesses sold more than $2 trillion in goods to buyers across the globe in 2022, with an additional $928 billion in services exported to other countries—everything from travel, communications, construction, insurance, legal services and more.
If your company is part of this nonstop trade activity, you’re already dealing with a unique set of complexities and risks. But until a customer thousands of miles away decides to ignore your latest invoice, you may have no idea just how thorny things can actually get.
Many issues can block your efforts to recover unpaid debt from overseas clients. There are no international laws governing business-to-business (B2B) collections, which leaves you without a clear road map for pursuing past-due amounts. And while you can engage a U.S.-based debt collection agency to represent you, they too may run up against significant barriers in trying to resolve the situation for you.
Here are the five most troublesome roadblocks you (or your agency) may face in attempting to collect what you are owed.
This one may seem obvious, but it’s easy to miss how profoundly language shapes the way we think and negotiate. Even if you’re dealing with English-speaking representatives, you may miss many subtleties in the statements they make. Likewise, they may fail to understand you fully. Miscommunication can cause the process to break down at any point, leaving you with few good alternatives.
Collection practices are governed by the laws and regulations of the country where your client is based. Even in Canada and Mexico—two of the U.S.’s most active trading partners—laws vary dramatically from the legal framework we’re familiar with here. Unless you or your agency know the relevant laws inside and out, recovering funds can be a struggle.
3. Business Conventions And Practices
In China, B2B debt collectors literally knock on doors to speak with business owners about past-due accounts. Compare this with the data-driven, mostly electronic collections strategies we rely on in the U.S. As you might guess, the differences go both ways. When I spoke to a group of Chinese entrepreneurs, they were shocked to hear that their American counterparts generally did not bear personal liability for business debts.
4. Bankruptcy Regulations
This is another legal difference that can make it nearly impossible to collect overseas. In the U.K., for example, the law allows creditors to call for involuntary reorganization of insolvent companies. These cases move so quickly that by the time U.S. creditors (or their representatives) initiate collections efforts, it may be too late.
If you’re a business owner in, say, Japan and an unknown collections agency from the U.S. contacts you, chances are good you will simply ignore them. After all, you have no idea who they are. On the other hand, if you hear from a large collections firm or a respected attorney based in Japan, you are much more likely to respond.
Why? Because this firm clearly has credibility and expertise. They know the laws and regulations that apply to your case and are aligned with the cultural practices that surround every business transaction in your country. They have a far better chance of working effectively with you to come up with a viable solution.
An International Network Of Partners May Work Best
The barriers described here explain why your success in collecting overseas debt will depend on engaging a collection agent with a strong local presence in the countries where you’re doing business. This may mean hiring a U.S.-based firm with a broad network of international partners who are ready to help you. Alternatively, you can forge a direct relationship with collections firms in countries where your clients are headquartered.
Whether you work through an international network or hire overseas firms directly, seek out well-known experts who handle a large volume of cases with a proven track record of success. Brief them fully, providing all the documentation they need to take action. And trust them to navigate the countless twists and turns that determine the speed—or slowness—of the recovery process. Things may not unfold on your timetable, but the right team will know the techniques likely to lead to a positive result.
The information provided here is not investment, tax, financial or legal advice and does not purport to be a substitute for advice of counsel on any specific matter. You should consult with a licensed professional for advice concerning your specific situation. For legal advice, you should consult with an attorney concerning your specific situation.
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Source: Fox Business
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