Introduction of the Euro
With the introduction of the Euro, many companies in Europe believed that having a presence in other European countries through their own subsidiary or branch office would be superfluous. They have discovered, however, that this is not the case, and that without a local presence, there is not only lower turnover, but they can also experience significant delays in the receipt of payments.
Delay of Payments
Reminders from abroad may be taken less seriously, bank transfers or cheque payments made late, and when reminders are sent by foreign companies, the intermediary banks involved in international payment transactions can be blamed for the delay. What can also occur in some cases (depending on country of origin and destination) is that the means of payment (e.g. cheques or bills of exchange) received by an exporting company and submitted to its local bank may only be credited to its account 4 - 6 weeks later. Any resulting overdraft will incur interest, which can be significant.
Banks and Handling Fees
Some banks refuse to discount foreign bills of exchange because of the risk and formal difficulties involved in debt collection abroad. Cheques or bills of exchange are only accepted for collection and a handling fee is charged per item, irrespective of the amount to be collected.
In addition, the foreign bank involved may also charge a handling fee for cheques or bills of exchange, resulting in substantial bank costs. For companies without generous profit margins, these costs can become quite an issue and they may feel like they are only working for the bank. Throughout the handling period of the payment, companies may be left without the much-needed liquidity to finance production and other expenses. This makes them dependent on current account overdrafts. Small and medium-sized businesses in Europe know from negative experience how difficult it can be to obtain overdraft facilities.
InterGest Accounts Receivable Management
Collecting debts abroad often causes considerable difficulties, as a reluctant debtor may believe that the creditor has insufficient knowledge of the local legal framework or might not pursue the matter with the necessary vigour.
This is where InterGest comes into play. Our collection department often achieves the desired result after a single reminder letter. However, even with particularly reluctant debtors our legal team finds the right ways and means of ensuring that they fulfil their obligations.
With offices worldwide and several decades of experience, we are able to optimally advise and support our clients in the selection of appropriate banks and effective accounts receivable management.