Conducting business abroad: What to do with unpaid invoices?
Due to the founding of the European Union, the introduction of the euro currency and open borders, it is significantly easier to conduct business within Europe then it was before. However, trading internationally could bring some complications for your company as well. It has a major impact on your Credit Management policies. When invoices are not being paid, your company has to deal with different legislations, within different countries. This could be difficult.
Where to start?
A good first step, is to research the company you are about to conduct business with. Specifically check the financial position of the company by reviewing a credit report. Such report will provide you with more insight on the credit rating of a company and therefore their financial position.
Payment agreements and terms of delivery
After receiving a positive credit report, it is time to close the deal. The next step in this process would be to agree on payment and terms of delivery. Within these terms it must be stated what the consequences are of not paying the invoice on time. By doing this, the company will be prevented from any discussion regarding this matter.
As a Dutch company, it is advised to include a statement highlighting that the Dutch law will be applied when invoices are not being paid. Naturally, when your company is originated somewhere else, it should be highlighted that the law of that specific country will be applied. An even better option would be to state that the law of where the business is conducted will be applied. In this way there is no ambiguity about where to summon when invoices are not being paid. Besides, it is strongly recommended to offer your terms and conditions in a foreign language as well.
Obviously, you will start the dunning procedure when the payment term has expired. In order to speed up the procedure it is recommended to change the dunning letter to the language of the receiver. In this case the debtor cannot argue that the dunning letter was impossible to read or unclear.
Take in account the payment morale
Payment morale differs between countries. It is commonly known that in more southern countries a poorer payment morale occurs. This could be the result of less advanced payment options. For example, there are still countries where payments are completed by check. Digital payment options which are more commonly used in for example the Netherlands, helps to a better payment morale.
As payment morale differs depending on country, we advise to keep your foreign dunning process equal to your process for domestic debtors. In this way uniformity is maintained within your process. However, since we know that foreign debtors are more sensitive for disputes, it is advised to follow-up by phone more often. Make sure to do so in the language of the debtor. This gives you the ability to respond quicker to the situation, which increases the chance of solving the dispute.
After completing your own dunning process, it could still be that the debtor did not pay the invoice. In this case you might want to get involved with a professional collection agency. However, not every collection agency (in the Netherlands) is able to help you with your international disputes. Most often there is a lack of knowledge, experience and specialists that are able to approach debtors in their mother tongue. This, however, is key to maintain effectiveness within your collection process. It is strongly advised to keep this in mind when choosing your international collection partner.
Besides having the knowledge, experience and specialists to operate internationally, it is important that your collection agency has a good (international) network as well. When collecting internationally, it is helpful when you can work together with local agencies. This makes it easier to reach out to the debtor and to start a legal procedure when needed. Besides, these local agencies can advise on how to design your dunning process, as they are aware of local payment morale.
Want to know more about this subject matter? Or would you rather receive advice about (international) debtor management? We are here to help. Please contact us by filling the form or call us at +31(0)20 - 346 07 46.