Firms looking to grow in markets outside of the UK are being urged to take precautionary measures to reduce their risk of late payment and debt before agreeing to export goods overseas.
Legal and debt recovery firm Lovetts has seen the number of overseas debts it is chasing for clients increase five-fold in the past 12 months and has collected over half a million pounds from businesses overseas.
While the increase in the number of debts being handled points to a much more active export market, encouraged by the UK government and its ambitious target of 1tn in exports by 2020, the concern is that businesses are not taking the right steps to protect themselves at the out-set of the contract.
With exports now slowing due to the sluggish growth in the eurozone and the strength of sterling against the euro, getting paid on time has become even more essential to UK exporters.
“When the Government first announced its intention to get 100,000 more companies exporting by 2020, we highlighted our concern that businesses were not being offered advice on reducing the risks of trading overseas, in particular, non-payment of invoices and bad debt,” says Charles Wilson, CEO of Lovetts.
“These fears appear to have been realised. The government’s ‘Business is Great’ website has only the barest of detail regarding payment practices and nothing regarding recovering debt from Non EU countries. We would therefore urge exporters to take heed of some simple steps based on our many years’ experience in recovering overseas debt.
Wilson offers tips for recovering overseas debt:
- Make sure you know who you are dealing with by checking the true identity of your client and ensuring they are creditworthy through a credit check. There is an increased risk when dealing with a customer not based in the UK.
- Agree which language will be used for the contract and subsequent communications
- Obtain acceptance of your Terms & Conditions in England & Wales. For overseas contracts this will ensure contract formation within home jurisdiction
- Make sure your paperwork is accurate and timely, leave no room for error
- Ensure you can prove delivery of goods or services
- Resolve any queries promptly
- Consider credit insurance cover
It’s also worth remembering that if businesses litigate, documents may need to be translated and personally served on the debtor.
“While all this groundwork won’t protect businesses from the risk of late payment it will put creditors on firm ground for any legal representations necessary,” says Wilson.