Over $24 trillion  of goods are exported around the world annually, but for export businesses, this trade is not without risk. According to our latest Global Survey , in a context of lower growth, trade disruption and geopolitical uncertainty 42% of companies expect payment terms to increase, and 40% expect nonpayment risk to rise in 2024. In an industry dependent on credit, defaulting debtors can seriously impact a business. 

It is possible to recover overdue payments from debtors – but it is never easy. In fact, international collections are always complex and context-dependent. Still, there are concrete steps companies can take to maximize their chances of being paid and recovering debt.

Why is export debt recovery more complex?

Export debt recovery is the process of collecting unpaid debts from international buyers. Unlike domestic recovery, which operates under a single country’s legal system and regulations, export collections involve creditors and debtors in different countries. Legislation varies from country to country, even within trading blocs such as the European Union where there might be common mechanisms to simplify debt recovery, and defining which legislation applies and determining the competent judicial authority can be tricky.

When it comes to collecting debt across borders, each country brings a unique legal, political, economic and cultural environment. Some countries have short debt recovery windows; in others, pushing debtors to pay will almost always result in a difficult recovery process. And the process can also be challenging simply because of language barriers and cultural differences between exporters and their international buyers.

I recently encountered a case that illustrates the complexities of this type of debt recovery, and the reason why we often encourage clients to prioritize amicable proceedings and avoid potentially lengthy legal ones. Our client, an exporter, had sold goods to an overseas importer that failed to pay for them. Our customer wanted to take the importer to arbitration, as stipulated in their contract, to collect the entirety of the debt.

This approach is sensible in a domestic environment. But when dealing with a foreign jurisdiction, it may take several years for arbitration decisions to be recognized and executed by that country’s legal system. In that time, the debtor could easily prevent collection by organizing insolvency. Instead, we explained the risks of arbitration to our client and used our status as a neutral third party to steer the debtor into a final agreement that resulted in recovering the majority of the debt.

In addition to issues specific to cross-border trade, the standard challenges in collections are sometimes compounded by distance. For example, if there’s a recovery process in a transaction involving perishable goods, reclaiming the goods might simply not be feasible because of expiry dates and expected travel time. Or in fashion and textiles, where there’s the element of seasonality and perceived obsolescence.

Best practices for exporters

In every situation, prevention is the best course of action for companies that want to protect themselves from unnecessary credit risk. Though no two export debt situations are the same, I’ve found that exporters improve their chances of timely payment and debt recovery by following these practices:

• Understand market differences: Don't assume processes and regulations will be the same as in your home country. Research and adapt to local practices.
• Be informed: stay on top of current affairs and business trends in the country and region where you are exporting.
• Be vigilant: Perform thorough checks on potential buyers and implement measures to protect against fraud, identity theft and unauthorized transactions.
• Document everything: Avoid relying on verbal agreements – instead, secure signatures on all necessary documents. This principle is crucial, especially in countries where signed delivery notes or contracts are necessary to start legal action.
• Act quickly: Time is critical in debt recovery. Submit invoices and collection files promptly to avoid delays and statute limitations.

These practices can be the difference between debt weighing on your business and invoices getting paid on time.

Global reach with local expertise

At Allianz Trade, we offer a unique global-local approach to recover debts for export businesses worldwide. Our centralized global team, composed of multilingual legal and financial experts, collaborates with local branches to tailor the best strategy for each specific case. Meanwhile, all over the world, our local teams leverage their deep cultural knowledge and connections. These local experts conduct site visits and build trust with debtors.

Building relationships is a key element of collections. Not only do we help maintain business relationships between our clients and debtors, we also spend time getting to know the debtors. We work to understand their reasons for late payments and help find solutions. I think our flexible, relationship-based approach sets Allianz Trade apart in the industry.

With over 500 business debt collections professionals worldwide, Allianz Trade has the reach and experience to recover export debt and offer companies lasting peace of mind.