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By Cai Xiao Xu
Along with the progress of global trade and finance, business competition between suppliers has become even more furious. Most international markets tend to be buyers’ markets. That means, the buyers dominate the market and have the voice. As a result, to purchase on credit becomes the mainstream. Commercial credit transactions are common in international business. In order to gain more business and develop well in the marketplace, vendors extend credit to their clients. Thus credit risk problems are looming. Traditional and conservative transactions also carry such risks. Unless the buyers pay in full, the risks cannot be avoided.
However, payment in full generates risks to the importers. Nowadays, credit management becomes a main task to financial managers, whether of the exporter or of the importer. And debt collection is an important part of financial and credit management.
Debt collection is defined as collecting or attempting to collect debts for another person or institution. A debt collection agency is an institution that regularly collects debts for an unrelated institution. When the debt exists abroad, debt collection action is an international one.
In international trade, buyers and vendors are located in different countries. There are long distances between both parties. The creditors can hardly know details of the social, economic and legal environment of the debtors’ country. This makes it more difficult for international overdue payment problems to be settled than domestic ones. In such a situation, turning to a professional debt collection agency appears attractive and cost-effective. A good debt collection agency is efficient, economical and expert. It can save business enterprises’ human resources and other input. Based on the above reason, outsourcing becomes popular in the debt collection industry. To select a good and suitable debt collection agency is crucial to credit management.
There are numerous commercial debt collection agencies all over the globe. As per related statistics, more than 100 debt collection agencies of different sizes operate in the small region of Hong Kong. In the United States, the number is over 1,000. These agencies must have their expertise and specialties so as to develop in this industry. Yet they differ somehow in efficiency, services, fees and credibility. “How can we select a superior one from all these agencies to assist us?” This question is frequently asked in the business community. We would like to take this opportunity to share with you the four essential characteristics that we have identified of an excellent collection agency.
l Great international reputation. Defaulting debtors undermine the basis of an economy’s credit system, and the purpose of debt collection and recovery is to maintain and lubricate that system. If a debt collection institution does not have a high and good reputation, it cannot get the trust from the creditors. In the same vein, if it does not have the high reputation, it cannot impose enough pressure on the debtors and produce satisfactory effect on the collection cases.
l Professionals and highly qualified experts. International debt collection is a challenging work that requires expertise and professionalism. The collection team needs to be versed in international trade and settlement, as well as international finance and laws. They have to know not only theory but, more important, to know about the practices in the above areas. What’s more, these professionals need to have a precise mind with logic. They should be able to analyze problems before settling them creatively. Common personnel without the above qualifications cannot vindicate the creditor’s (client’s) rights and benefits and fight for them appropriately.
l A collection network that covers the debtors’ regions. A fully developed international debt recovery institution must have an extensive network all over the world. It also needs to have intensive units to do collection work in special regions. For its own units and its extensive network as well, a professional institution ought to assess them systematically and evaluate the performances rigorously. With the qualified units and network teams, a good collection agency can deal with different types of debtors, regarding the specific situation and character of principals. A good collection agency has the capability to choose the suitable professional and/or network partner to proceed regarding diverse cases and disputes.
l Office automation and modernized working platform. International debt collection requires plenty of communication with parties in different regions. Spatial distance adds some difficulty to these communications. In the era of information technology (IT) and with the development of the Internet, office automation becomes a necessity to a majority of organizations. More and more international debt collection and management companies choose to establish their own business IT systems in order to integrate enterprise resources and improve working efficiency. Some collection agencies even provide services via the Internet to their clients. The clients have the option to place claims via the Internet, to browse status reports on the Web, and to make real-time communications with collection agencies on the website.
