Challenges Facing Cross Border Credit Collection By Gareth Fawke Director Inksmoor Finance Group

Contents Introduction The deal is signed BUT… The value of documentation Do you know the Customer Planning for debtor behaviour The language Barrier Cultural differences, The ease of doing business Everyone deserves to get paid!?! Using legal action – understanding how courts work Inksmoor case study

Introduction International businesses face a higher exposure to non payers than domestic business Due to many reasons, discussed in this presentation The aim is to identify these reasons to help remedy resolution Before they become an issue Starting in a chronological order within the sales & order process Ending with an “if all else fails” approach

The Deal is Signed BUT… The Value of Documentation In any order and sales process documentation is the key to “getting paid” From initial contract, order and fulfilment being diligent in presenting the client with the correct documentation is a must Contracts of supply (products, services etc) Purchase orders Gaining sign off at the correct time All before the invoice is raised Think in stages The value of this documentation although extremely important to each stage within the supply will hopefully never been seen BUT… if it is it will be in a recovery situation

The Deal is Signed BUT… Do You Know The Customer? Ask questions around the following; these should be answered upfront before the completion of the sale Do you know the company your dealing with? You know the main order contact but who is the purchase ledger contact? The person ordering communicates in your language but does the person paying you? Is the company credit worthy? What will your debtor require to pay you, can you satisfy these needs Are there any other additional barriers that apply to dealing with this country that don’t to domestic business What will possibly delay payments? Do your homework before, knowing after is too late

Planning for Debtor Behaviour – The language Barrier The most common form of payment and collection issues for cross border transactions relate to a lack of communication and language skills involved with the invoicing process Your customer has placed the order and communicated well possibly in your native language Supply has taken place The credit control process begins Who will you be speaking to, to ensure you get paid? The order was place in English but the purchase ledger don’t speak English A very common problem The problem also persists with global businesses with centralised operations Sales in one country and operations in another Multi lingual credit controllers are a must for supplying cross border or for centralised operational staff

Planning for Debtor Behaviour – Cultural Differences, The Ease of Doing Business Cultural differences must be planned for to; Save offending the customer Wasting time Understand when you will get paid Examples are; Italy – closes for almost all holidays especially a 6 week period in the summer Spain – July and August is ran on skeleton staff with very few senior people available to authorise payments; however the Spanish are usually good payers UAE – Poor payers, likely to default on debt Switzerland – good payers who hate being chased for monies Belgium, Denmark, France, Germany, and Holland are generally good payers

Planning for Debtor Behaviour – Cultural Differences, The Ease of Doing Business Source Euhler Hermies – Economic Outlook

Planning for Debtor Behaviour – Cultural Differences, The Ease of Doing Business Source World Bank Survey; 1 being best 189 being worst Taking into account sales process Through to collection & recovery

Planning for Debtor Behaviour – Cultural Differences, The Ease of Doing Business Average payment terms and realistic collection rates per countries as issued by Nexus Ciffs Belgium – Average payment terms issued 35 Average days outstanding 50 Denmark – Average payment terms issued 7-30 Average days outstanding 30 France – Average payment terms issued 30-60 Average days outstanding 70 Germany – Average payment terms issued 30 Average days outstanding 45 Italy – Average payment terms issued 30 Average days outstanding 95 Spain – Average payment terms issued 60 Average days outstanding 70-80 Switzerland – Average payment terms issued 30 Average days outstanding 49 UAE – Average payment terms issued 30-60 Average days outstanding 105

Everyone deserves to get paid Everyone deserves to get paid!?! -Using legal action – understanding how courts work In a recovery situation you need to understand your options The contract should say where i.e. under the judicial system of England & Wales it is to be enforced Once enforced how will you transfer collection to the host country of your client Using local lawyers with local knowledge Before all of this you have to understand is it worth perusing in the clients country and what directive the for recovery Common directive listed below for for a selection of countries Late Payment Act 2000/35/EC Belgium Law – Belgium Late Payment Act Recast Directive 2011/7/EU – Germany, France, Italy, Spain, Late Payment Act Article 73 and 104 of the Federal Act on the Amendment of the Swiss Civil Code Late Payment Act The UAE Codes of Commercial Practices

Inksmoor Case Study Media company operating in the majority of countries in the world Centralised operations covering the European countries 1 credit controller for 500 debtors covering 8 languages Most collections operated by email due to language barriers Inksmoor contracted to take over the credit control by replacing internal staff Credit control changed to predominantly telephone action supported by email Inksmoor staff fluent in particular languages needed Local knowledge of debtor behaviour understood In the first two months debtor days reduced by 21% Sales teams working with not against credit controllers