When you enter new and unfamiliar markets, ensuring that you get paid may be as important as clinching that coveted export deal. At Intrum Justitia, the International Service Line has an extensive global network that helps businesses collect delinquent cross-border payments.
- It is essentially a traditional collection service but for cross-border transactions and in particular when clients are exporting directly to customers, says Jonas Mohlin, head of International Service Line.
The International Collections service has an extensive global reach where Intrum Justitia’s 19 offices constitute the backbone and cover most of the European market while the Intrum Partner Network with around 50 partners worldwide blanket the rest of the world.
- All in all we reach around 180 countries although most of our business, around 85 percent, is within Europe and with major exporting countries such as Scandinavia, Germany, Holland and France, says Jonas Mohlin. Companies generally may need a collection service when they export to a country where they have no office or representation or when they have concentrated their financial and accounting functions in a Shared Service Center (SSC).
- When a company operates an SSC they may need our assistance even though they have representation in a particular market. Several countries which are smaller in international trade, like Ireland and Hungary, have a very interesting potential for us as they often attract SSCs from large companies, says Jonas Mohlin.
The payment discipline differs wildly across Europe both in terms of how timely payments are made and if they arrive at all. According to the European Payment Report (EPR) published by Intrum Justitia, Italian companies take on average 80 days to pay their suppliers while in the UK it takes only 20 days on average. In general payments are slower in southern Europe compared to the northern part of the continent.
- The report investigates payment behaviour and we see no difference between domestic and cross-border behaviour or the risk of not getting paid at all. The key to minimizing risk is to know your customer and when problems do occur, act swiftly and seek help if needed, says Jonas Mohlin.
The EPR also reveals that the respondents have to write of 3.1 percent of their yearly revenues due to non-payments and in countries like Greece this figure runs as high as 10.4 percent while in Croatia only 0.9 percent of revenues are lost.
- One common reason for paying suppliers late is financial distress and as an over-seas supplier you are likely to be quite far down the priority list so it is paramount to try to assess the financial health of the company you do business with, says Mohlin.
Slow payments and impose liquidity restraints on companies and in some case deter them from hiring and expanding their business. In the EPR 40 percent of the respondents said it hindered growth and as much as 31 percent said it may threaten their long term survival.