Too often perceived as a conflictual approach or a simple cash flow operation, amicable Debt Collection actually plays an essential role in your client relationships. As long as you adopt an amicable, human and differentiated approach according to your partners' situation. Expert advice, testimonials and useful cases to help you collect your unpaid debts without jeopardising your business relationships.
Appropriate communication, customised strategy: the keys to successful amicable Debt Collection
In a globalised economy, where commercial relationships are the foundation of growth, Debt Collection constitutes a major challenge for companies. For executives and financial managers, it is a key lever for maintaining the financial stability and resilience of their companies in the face of economic shocks and uncertainties. Balancing efficiency and diplomacy, Debt Collection is a delicate art: how can you effectively collect your debts while preserving commercial relationships that have sometimes been built up over several decades? The answer lies in an amicable, culturally appropriate and strategically thought-out approach.
More than just a simple request for payment or a negotiation between two parties, amicable Debt Collection is a complex process that requires a deep understanding of the debtor's environment. Business cultures, payment behaviours, legal environments, negotiation levers: when it comes to collecting your debts abroad, cultural differences are one of the main obstacles to a reliable and rapid outcome. On top of it are language barriers, which are often a source of misunderstanding, communication modes, and differences in ethical standards that can undermine the quality of exchanges and the relationship with the debtor: behaviour that is considered appropriate in one culture may be misinterpreted in another. All these factors influence the way you approach debtors and impact the effectiveness of your collection efforts.
In Northern Europe, such as in Germany, direct and factual communication is often more effective since it is perceived as a mark of professionalism. In Asia, such as in India, personal relationships often predominate over contractual aspects: a more indirect and courteous approach is therefore preferred in order to foster harmony and respect in the relationship with the debtor and increase the chances of collecting an unpaid debt.
- Thierry Gasnier, Group Debt Collection Director.
This reality therefore means that collection strategies must be differentiated according to the markets and the profile of the debtors. This is an essential step in establishing a relationship of trust and compliance with the buyer. Not only does this optimise the collection rate of your debts, but it also turns this tricky moment into an opportunity to strengthen client relationships, thus avoiding turning a simple late payment into a major conflict.
Prepare for Collection from the outset of the commercial relationship
To secure your receivables, unpaid debts should be anticipated right from the contract phase: this mainly involves clearly defining and communicating the payment terms, the consequences of late payment and the potential remedies from the outset of the relationship with your client. These preventive measures help establish a framework of trust in the early stages of the business relationship and give you the means to successfully collect debts amicably when the case arises.
This transparency applies to all steps of the Collection process. This means regularly informing the client of the planned milestones, ongoing developments, and available options. This proactive communication helps maintain a constructive dialogue and preserve the business relationship even during the difficult phases of Collection.
Being transparent means that we are open to open discussion from the very first moment. This avoids any misunderstandings while showing the debtor that we intend to work together on the case to find a solution that suits everyone. Debtors are much more willing to cooperate when they feel they are being treated fairly and not simply approached to settle their debt.
- Ayham Ghandour – Receivable Manager of Coface Middle-East.
Disputes: behind each unpaid debt, a story to decode
Usually, disputes represent the ultimate test of amicable Debt Collection. But before a commercial dispute can be settled, it is first necessary to understand the real causes of the unpaid debt in order to identify appropriate and mutually acceptable solutions.
"In most cases, there is an emotional component to the dispute between the parties, who have often already discussed the matter and remain firmly entrenched in their positions. Commercial disputes often mask temporary cash flow difficulties that the debtor is reluctant to share with their partner. It is therefore essential to adopt a listening posture in order to understand the real nature of the dispute. Even in the event of a conflict, a respectful approach and active listening generally lead to an amicable settlement of the debt." - Thierry Gasnier, Group Debt Collection Director.
A client of Coface's Debt Collection services for several years, Dinesh Singh from the Indian multinational Blue Star emphasises the delicate balance that must be maintained between a strong cash flow and a long-term client relationship. A century-old company, Blue Star has been trading with some of its partners for over half a century!
Debt collection is much more than a simple transaction, it is at the heart of the relationship with your business partner. Transparency and empathy play a key role at every stage of the collection process.
- Dinesh Singh, Associate Vice President Finance of Blue Star.
This mindset greatly helps to avoid any escalation to litigation proceedings, which could definitively compromise the business relationship.
Real-life example
A Saudi client of Coface, who was requesting payment of a large debt from his American debtor, sent an email that was considered inappropriate and even threatening. In response, one of the senior executives of the purchasing company in the United States, who was copied on the email, refused to pay the debt. Disappointed by this reaction, the Saudi client asked Coface to take immediate legal action. In the end, Coface's local teams in the United States advised him to send another message, adapting the tone to the local context and focusing on proposed solutions. As a result, the debt was settled by the debtor in just 48 hours!
Data and predictive analytics to anticipate the risk of non-payment
The expansion in data usage, combined with the power of new technologies, now offers cutting-edge tools for adapting commercial policy and anticipating the risk of payment default. But which data should companies rely on today, and how can they exploit it to predict the risk of non-payment by a business partner?
Real-time analysis of payment behaviour is transforming commercial risk management. Based on an unique global data patrimony as a global leading player in Trade Credit Insurance, solutions developed by Coface such as Selectio help companies to spot early signals of potential payment difficulties and to take action before the situation deteriorates.
"At Coface, we focus on facts and data analysis: we have 80 years of global expertise in payment history. We collect this information to track changes in payment behaviour in real time. This enables us to generate early warning signals: slower payments over time, more frequent (or even systematic!) disputes over invoices, or unusual changes in order volumes or patterns." - Ayham Ghandour – Receivable Manager of Coface Middle-East.
By monitoring weak signals of payment troubles, companies can protect themselves from unpaid invoices before they occur, and thus shift to a preventative Collection strategy, rather than reacting to payment defaults as they arise. This predictive method protects your cash flow while maintaining a relationship of trust with your client.
Your Debt Collection journey starts here
Don't let unpaid debts weaken your cash flow and disrupt your business. Relying on a leading credit risk management player and its global network of local experts allows you to ensure your company's financial stability while safeguarding your relationships with your business partners.
Master your amicable Debt Collection with Coface: Contact our experts now to find the Coface Cebt Collection solution that suits your business needs.
