News & Notes from IACC
International B2B Collections in Times of COVID-19
Author David Zannoni – Sourced from Cobroamericas blog
The COVID-19 pandemic has caused a worldwide economic crisis without precedents in recent history. The economic crisis has had a big impact on local and international businesses alike and for many companies it means liquidity problems.
In international business, creditors may face difficulties collecting outstanding invoices. Questions may rise as to how to approach international B2B collections in times of COVID-19.
Here are some thoughts as to how to approach international collections during the current economic crisis.
Liquidity may become an issue for debtor and creditor
If you feel awkward following up with companies abroad about outstanding invoices, please keep in mind that like debtors, also yourself as creditor may, at some point, be facing liquidity issues due to the current economic crisis. International trade and in connection therewith, cashflow between countries have deaccelerated or sometimes, have come to a full stand-still. The creditor continues to be in its right to claim payment of outstanding invoices, for work or services delivered. Actually, it is of utmost importance and sometimes even vital for the creditor to get invoices paid, in order to safeguard its own liquidity.
International B2B collections will continue
The way the creditor approaches international B2B collections, in terms of flexibility, as well as the possibilities of the debtor to pay, will no doubt be affected by the current economic crisis. However, it is a fact that collections will continue. That is, during the economic crisis and also once the crisis is over (which will eventually happen). Furthermore, payment issues may have existed prior to the COVID-19 outbreak, hence why the current economic crisis should not be a reason not stop international collections should not be taken as an excuse for debtors not to cooperate with payment.
Focus only on amicable B2B collections
Having pointed out the above, there will inevitably be changes in the way international collections are carried out. As already stated above, the current crisis means liquidity issues for both creditors and debtors. Also, in some countries, courts are closed for anything other than urgent cases. Taking into account that in any case enforcing payment of international claims through legal proceedings is a complicated matter – costly and time consuming – the focus for international B2B collections should for the moment be entirely on amicable collections. An amicable approach to settlement of international claims is more than ever necessary. The creditor should do more phone calls to find out what the debtor’s current situation is and send less or no letters at all. Try to limit email follow ups to the minimum.
Show empathy for your counterpart abroad
Your debtor’s situation may change rapidly, due to the spread of COVID-19 and subsequently, the effect on the economy and measures that local governments take. Showing empathy for your counterpart is therefore essential during today’s economic crisis. Call your debtor up and ask them how their business is going. Try to understand the circumstances they are in. Remember, your debtor was once – or still is and may be again in the future – your client! Try to level and understand the issues they deal with. Keep in mind that many businesses may have to temporarily close doors, and some may not be able to survive and go bankrupt. The COVID-19 outbreak and the economic crisis may have a big financial and mental effect on people.
Negotiate a tailor-made solution for the debt
With the aforementioned in mind, be prepared to think out of the box.This may include waiving parts of the debt,agreeing to long term paymentplans, accepting postponement of payment for a certain period of time, or a combination of these options. It is very important to be prepared to settle in international B2B collections. Focus on creating a win-win situation for both parties. If your counterpart feels that he may also win something during the current economic crisis, this may entail an opportunity to settle a long-time payment issue, or to recover a lost commercial relationship.
The COVID-19 outbreak and the global economic crisis caused by the outbreak, means that not only the debtor, but also the creditor, may face liquidity issues. However, international B2B collections will continue. During the current crisis, it is important to take an amicable approach to payment of outstanding debts, and to show empathy for your counterpart. With the foregoing in mind, the focus should be on negotiations for a tailor-made solution for outstanding debts during the COVID-19 crisis.
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