Here are a few guidelines:
1. Check the identity of your potential partners
Before entering into a business relationship, checking the identity of your business partner(s) is a necessity. A positive identification can protect you from fraudulent activities and sets the basis for valid contracts. Besides credit information and credit assessments of companies, it is also possible to commission a historical investigation of the company, regardless of the country of the business partner. This information includes supplier experience, self-disclosure, local research as well as the internal debt collection experience.
2. Check credit rating and solvency
Not every customer is profitable – especially if they do not pay their invoices. That is why companies should always check the credit rating and solvency of their customers from the start. This will give you the information you need to make decisions.
Business situations are always changing. This can mean changes in the rating and solvency of a company. When dealing with foreign companies, you may not get the information you need to take the necessary precautions on a timely basis. This is why, it is even more important to monitor the financial situation of your foreign business partners. Monitoring solutions inform you of relevant financial changes of your business partners and give you enough time to react to these changes.
4. Creating secure contracts
The basis of all business is the legal agreement. Special attention should be paid to the business customs and laws of the partner’s country. Payment terms should be written and as far as possible, a reservation of title included in the agreement. It is also necessary to negotiate the place of jurisdiction.
When trading internationally, billing should be done promptly. Billing positions must be easily understood and clearly listed. Necessary explanations should be in the language of the respective partner. Legitimate complaints should be clarified quickly and if necessary, the invoice should be adjusted accordingly.
6. Appropriate dunning notices
If a bill hasn’t been paid within the payment terms, the German company must remind quickly and consequentially. If however, it is a foreign company that is behind in their payment schedule, the possibilities are quickly exhausted. It is more promising to hand over the invoice to a collections company at an early stage. This company should be working with local experts that are familiar with the language, business culture and legal aspects of the respective country. The company should also work closely with the debtor, the local authorities, courts, insolvency trustees and lawyers. A suspension of delivery should follow at the latest, after the second reminder.
7. Enforcing Legal Claims
Before taking legal steps in a claims collection, checking the possibilities and requirements is a must. Additionally, the incurred costs should always be considered. The legal steps taken should be economical for the debtee. Furthermore, the financial situation of the debtor should be taken into account before legal steps are taken.
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