Did you get the skills of debt collection?

2024-01-12|30 views|Development skills

Doing business, debt collection is an essential skill. In earlier years, debt collection methods included extreme measures such as splashing paint or making threatening phone calls, but nowadays, such extreme tactics are rare.
 
Today, we will discuss the issue of debt collection in international trade. Since most of our clients are located overseas, debt collection is not as convenient as in domestic trade. Therefore, debt collection in international trade requires technical expertise. What methods should be used? How to approach it?



This article will discuss these two aspects and provide some ideas for our fellow traders.
 
In terms of debt collection methods, most of people still use emails or phone calls. A crucial aspect of debt collection is to control the pace, frequency, and timing to avoid putting pressure on the client and causing resentment.
 
The timing of debt collection is usually not fixed, but if a client promises to make a payment on Monday, we should avoid collecting on the same day. Due to time zone differences, when it is morning on our side, clients in Europe and America may not be awake. Additionally, clients often have a busy schedule on Mondays, so it's better not to disturb them. If collection is necessary, it should be done in the local afternoon time.
 
After discussing debt collection methods and considerations, let's talk about how to approach it. Smart international traders emphasize tact and diplomacy in debt collection. In fact, much of the debt collection work begins from the moment the order is received. For example, upon receiving a client's order, you can say, "Noted with thanks for the order confirmation... Hope to receive the deposit or LC asap so that we can arrange the production plan earlier."
 
The underlying meaning of this statement is that we won't schedule production until we receive the deposit or the letter of credit takes effect.
 
At this point, clients usually express their intention to process the payment promptly. We can reply with, "Noted with thanks. If the deposit is arranged, please kindly send us the bank receipt for our easy checking. Thanks in advance."
 
If the client is using a letter of credit for payment, you can say, "If LC payment, please send us the LC draft for our approval before the original one. Or once the LC is arranged, please send us the LC copy for us to check with the bank."
 
Client payments usually take 3-5 working days, and it's advisable not to rush during this period. After one week, if the payment is still not received, you can remind the client, "Till now, we still have not received the payment. Could you please kindly send us the bank receipt for us to check?"
 
If there is no response after sending an email, you can wait for 3-5 days before sending another email: "Till now, our bank still has not received the payment. Our company is arranging the production plan for August at the moment. In order to ship your order on time, please kindly release the LC or deposit asap. Thanks in advance."
 
After completing these steps and if the client still hasn't responded, you can try communicating through a phone call. If the client is willing to fulfill the contract, they will inform you about the payment progress. Then, wait for another week or so. If there is still no progress, reduce the follow-up frequency and wait for 2-3 weeks before following up again.
 
Regarding the situation where the goods have already been shipped, how do you approach debt collection? You can use the excuse of reminding about the estimated time of arrival: "ETA will be Jul. 10th. In order to pick up the container on time, could you please kindly arrange the balance asap so that we can express the original Bill of Lading to you earlier."
 
For cases where clients are withholding the final payment, it has been mentioned in a previous article, which you can view by clicking [here]
 
In conclusion, overdue payments are common in international trade, and it's important not to be overly hasty in debt collection. Debt collection is not something shameful; with the right skills, it can be an opportunity for communication with the client.


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