Collecting debts the easy way

Debt collection, the recovery of outstanding commercial payments, poses a great challenge to internationally active companies in particular. Euler Hermes, the world  leading credit insurer, likens the various practices and levels of difficulty in individual countries to '50 Shades of Grey'. The credit insurer didn't quite examine 50 countries, but looked at 44 different countries in its current study and league table - however, the gray areas between 'the good, the bad and the ugly' are huge. In addition to a country's payment culture, the efficiency or corruption levels of the legal system and the difficulty and success rate of insolvency proceedings play a key role. Sweden is in first place, with the lowest level of complexity associated with collecting unpaid debts, similar to Germany (2nd), and its neighbors in Austria (3rd) and Switzerland (4th place).

 

At the bottom of the list: Saudi Arabia, behind the UAE, Russia and China

"Together with the U.S. as a result of their poor payment culture, Italy, the Czech Republic and Poland are ranked as the 'under-achievers' as far as debt collection is concerned," said Ludovic Subran, Chief Economist at the Euler Hermes Group. "However, it's generally extremely difficult to collect outstanding debts in Saudi Arabia, which is placed at the bottom of the league behind the UAE, Russia and China. China is an important growth market for many German exporters - however, payment deadlines are excessively long, late payment of fees is not efficiently regulated and there is a lack of transparency in the justice system. In addition, the law does not, for example, impose any restrictions on a Chinese trader wanting to open a new business - regardless of whether he had previously been responsible for a company's bankruptcy and not paid off his creditors."

Country collection complexity ratings in 2014

Country collection complexity ratings in 2014

Download graphic

You can print it without charge, as long as you cite the source: allianz.com

However, six of the ten most important trade partners of German companies have levels of complexity surrounding debt collection which, at most, present a 'significant risk'. This can be explained by the fact that many of these are European countries. There are uniform guidelines across the European Union. This standardization has created a generally business-friendly zone, considerably simplifying trade and EU-internal debt collection. The advantages of this EU-standardized system have an impact on the positive ranking of countries with poor payment cultures, such as Italy and Poland.

 

5 golden rules to reduce debt collection risk when entering a new market

"Nowadays, companies need to enter new emerging markets to ensure growth, despite the fact that this can be associated with considerable risk," said Thomas Krings, Chief Risk Officer at Euler Hermes. "In addition to safeguards or rules for title reservation, a couple of golden rules are helpful: never underestimate doing business overseas, find out about laws, provisions and payment culture. Secondly, show backbone when you're negotiating with debtors - standing up for yourself never hurt anyone. Thirdly, beware of legal measures - out-of-court agreements are often more efficient, quicker, and incur fewer costs. Fourthly, collecting even a penny from insolvent debtors is a real challenge. This leads to number five: the early bird catches the worm. The longer a company waits, the harder it will be for them to collect the money they're owed."

Assistance offered by agreements relating to reservation of title may not be helpful in all countries. In some countries, Germany included, agreements relating to reservation of title can support companies with their options when it comes to debt collection. They can demand that delivered goods are returned if these have not been paid for.  Only once payment has been received are the goods transferred from the seller to the purchaser - even if the delivered goods have already been processed further. In France, however, goods change hands when the owner signs the contract.

 

In the USA, the Gulf States, Russia, Mexico and Hong Kong, agreements relating to reservation of title are simply not allowed.

The new Euler Hermes mobile app, 'Land of Payment', was developed to help customers fight their way through the debt collection jungle, in particular with relation to debt collection regulation, insolvency law, payment culture, transparency, efficiency and legal corruption: highly complex topics which vary wildly across the globe.  An interactive map provides an overview of the biggest difficulties in each country. http://www.eulerhermes.com/Debt-Collection/Land-of-payment/Pages/land-of-payment.aspx

As with all content published on this site, these statements are subject to our Forward Looking Statement disclaimer:

 

Antje Stephan
Euler Hermes Deutschland
Phone +49 (0)40 8834-1033

Send email

Remi Calvet
Euler Hermes Group Media Relations
Phone +33 (1) 84 11 61 41

Send email

Mar 26, 2024

Lights, camera, action: Navigating the economic landscape

read more

Mar 26, 2024

Americans Reducing Retirement Savings and Taking on Debt Due to Inflation

read more

Mar 12, 2024

Sustainability will be treated like finance and we need all our employees to work on it

read more