Tricky terrain: What do debt collection and marriage have in common?

22 June 2021

Debt collection can be a bit like marriage counselling. As in a marriage, a business relationship between a company and its customer can have its ups and downs. And saving the relationship isn’t to do with whether you can avoid difficulty, but how you deal with it.

There are two sides to both of these types of conflict, with a lot at stake. And there is often a third party, there to help them reconcile and hopefully come to a compromise. I have seen my fair share of business conflicts be resolved, and to be honest, I have felt a bit like a therapist at times. I take this “mediator” role seriously, and I’ve even had the debtor party come and thank me privately for my impartiality after we all came to an agreement.

The challenge in a debt collection situation is really that nobody wants to be treated like “the bad guy”. And my goal is to come to a resolution where both parties either go their separate ways happily, or decide to continue the business relationship. It’s about understanding the art of compromise, having the expertise and resources to preserve the relationship or minimise conflict, and helping ensure that all parties feel served.

Expert management of debt collection is essential to any business. And whereas many corporations have an in-house team to speedily navigate these situations for optimum results, smaller companies often get their resources completely tied up in tricky and laborious processes. Without the right expertise, the results tend towards suboptimal and broken business relationships (at best), with wasted time and losses (at worst).
So how to increase the chances of debt collection success? There are three essential factors:
  1. Act quickly
    In about half of all cases, debt collection occurs in the first 30-day past-due period. It requires a great deal of expertise and resources for a debt collector to act both quickly and skilfully on behalf of their client.
  2. Act locally
    Reach out to the debtor in their context, with requests and communication accounting for local laws and procedures.
  3. Act expertly
    Debt collection is delicate and complex; it cannot be improvised. It is important to act through specialised experts who understand the art of compromise and cultural particularities around payment behaviour.  
A third-party debt collector is a good option for many companies, particularly SMEs, which may not have resources dedicated to this important process. But businesses should select their partner carefully, according some must-have criteria.

First, the debt collector should be well established and trustworthy. Such partners are financially solid with a track record of resilience, even through economic downturns or unexpected events, such as a pandemic.

Just as important is the third-party’s savoir-faire. They must know how to be neutral with all parties involved: their client—the creditor—and the debtor. When everybody feels respected and treated fairly, it helps to ensure a happy compromise.

Finally, it is key to consider a third-party debt collector’s network. This is particularly vital in export, where debtors and creditors are based in different countries. You need a partner that has the right local know-how, reputation and credibility in the country and sector where you are seeking to recover debt.
In an ideal world, we would live happily for ever after and everything would be paid on time. But in personal relationships as in business, things don’t always happen the way we plan them. When the unexpected does happen, it needn’t be a cause for despair. If you choose your debt collection partner with care and an eye for the long-term, this partnership can help solve financial issues that arise and preserve valuable business relationships through inevitable rough patches – all while minimising stress, conflict and losses to your business.

Besa Shkembi

Head of International Debt Collection, Allianz Trade France