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Too many cooks spoil the broth! Is this also true for international debt collection?

Tanja Musolf
27.09.2020 | 5 minutes
Compliance with the various regulations is essential

Local regulations present a challenge – The Netherlands, Belgium, and France as examples

It is simply a given that legislation is unique to each individual country.

This is even the case in the European Union, where many aspects have already been harmonized. Beneath the highest level of legislation, the countries actually vary significantly – even in overlapping language regions such as the Netherlands, France, and Belgium. This results in special challenges for international debt collection.

Here are some examples of differences in regulations affecting receivables management:

  • In the Netherlands, debt collection fees can be charged, albeit within a strictly regulated framework.
  • In Belgium, dunning fees may be charged as long as they are reasonable, justified, and contractually regulated by general terms of business.
  • By contrast, charging collection fees is not permitted in France. Here, collection agencies receive a certain percentage of the principal claim after it has been collected.

The list of special regulations and laws in these countries and others in Europe and beyond goes on and on. It all comes down to the details. It therefore appears to make sense to use one “cook” or debt collection agency per country that understands the local circumstances and local “tastes”, including in terms of how to contact defaulting payers.

Local regulations

Netherlands

Netherlands

debt collection fees can be charged

Belgium

Belgium

may be charged as long as they are reasonable & justified

France

France

charging collection fees is not permitted

The different local regulations pose a major challenge for international debt collection. Examples of the different regulations are:

Overarching process optimization versus “local cooking”

Based on my years of experience with the special characteristics of international debt collection, I am a firm supporter of using local expertise. At the same time, however, I am also a big fan of transparency and process optimization. These latter two aspects are important, but sadly often suffer when centrally managed companies expand their business to different countries and commission local financial service providers or collection agencies with handling receivables management. The weaknesses in this approach typically become clear when it comes to the consistent implementation as well as the holistic review and improvement of processes and results – if not before. Consider these two examples:

  • Different service providers generally use different methods or interfaces for transferring files, and they are not all equally secure, fast, or easy to use. This means extra work for the central IT department in setting up, verifying and further developing data transfer.
  • In the case of different collection partners, the form and content of the reports usually differ – depending on which systems are used and how much intelligence and creativity are put into analysis and reporting tools. This makes it difficult for central departments to assess the performance of the individual countries, compare them with each other, and uncover potential areas for improvement.

So, despite good performance by individual collection agencies, it can be hard to achieve an ideal overall result this way.

The ideal process or ideal partner?

In order to avoid the shortcomings of the local approach to international debt collection, companies can define processes and request the individual service providers to follow these procedures. But companies also run the risk that local interpretations and implementations may vary. As a result, they again need to expend considerable effort in reviewing and coordinating these partners, instead of concentrating on their core business.

An alternative to defining and monitoring processes in-house is to involve a central partner for international debt collection. Here it is important to think about what the service provider should bring to the table. Besides presence and expertise in the relevant countries, this could include standardized and automated processes for data exchange, consistent and clear reports, as well as the monitoring and improvement of important parameters such as response times and customer satisfaction. And, it is also important to have a central contact person for all matters relating to cooperation.

So, to return to the original question and my “yes and no” answer at the beginning:

NO, different cooks or local debt collection experts do not necessarily spoil the broth.

In fact, they are even indispensable for correctly dealing with the respective legal systems and market conditions. And YES, from a central perspective, extra work and an incomplete overall picture may result from purely local partnerships. In this case, a Maître de Cuisine is missing – or the central authority and coordination function that ensures potential in debt collection is fully utilized. This could be an international financial service provider that manages all processes efficiently using an innovative platform.

How you can optimize your international debt collection by combining local expertise with central management?

Let´s find it out!
Tanja Musolf
Vice President International Key Account Management

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