How to deal with overseas bad debts at the end of the year

In the Pearl River Delta, this world-famous “world-renowned construction center”, every day a stage of “Yang Lai Lai” arrears is staged. With the economic downturn, the risk of overseas bad debts has risen sharply this year. China is a big exporter of fasteners. Export bad debts are a nightmare for exporters. Therefore, tight enterprises must pay attention to the risk of overseas bad debts, seek a path to minimize this risk, and then form a new competitive edge for the company.

There is a risk that the company’s exports do not pay, and export credit insurance can allow companies to evade this risk. The so-called export credit insurance is actually not a new thing. It appeared in the UK in the early 19th century. It is actually a country. The government has established official credit support to promote the export of domestic products and services. At present, more than 50 countries have established export credit insurance agencies.

According to statistics from Guangdong Branch of China Export Credit Insurance Corporation, from January to October this year, the number of new insurance incidents in Guangdong increased by 41% year-on-year, mainly due to the buyer’s bankruptcy, inability to pay debts, default on payment, and refusal to accept goods.

"Big Buyer" becomes "Flicker"

In fact, in Dongguan's vast processing and manufacturing industry, various industries have established a common collection rules. Most of the fastener companies in Dongguan are factories of Hong Kong companies in the mainland. In Guangdong, every day there is such a difficult overseas collection story that it is hard to tell. This is no exaggeration. And, for small and medium-sized enterprises, each payment default is enough to be the last straw to kill the camel. "A new customer has come to see him as beautiful and beautiful. You can't believe him. It's best to use the middlemen, such as China Export Credit Insurance and related organizations in Hong Kong, to understand the details of this new customer. It's safer." A Dongguan company uses their experience as a guide to our advice.

Most of the bad debts overseas are SMEs. The financial crisis has just run over Dongguan, and the European debt crisis has returned. Wang Lijun, head of the Dongguan branch of China Export Insurance Co., Ltd., obviously felt the strangeness of this piece of land in Dongguan. Earned money and lost money are like a sudden drop in the headboard. Wang Lijun cited another set of data. From January to October this year, from the distribution of claims cases, nearly half of the payment cases were SME cases. What ulterior secrets are hidden behind the “overseas Lai Lai” arrears the company? What are their operating methods? According to Wang Lijun, “Overseas Lao Lao mainly divides two kinds. First, there is money that he does not want to give. Buyers place a single order and default. Second, they really have no money. Buyers place orders, but due to shrinking external demand market, buyers At one time, the funds could not be turned around or even went bankrupt." "The second reason for the overseas Lao Lai defaulting on payment cases is more and more after the financial crisis occurred in 2008."

Bad debt under the plight of regret

As far away as Wenzhou, Zhejiang, it was also plagued by overseas bad debts. Also in September this year, the China Xinxin Insulation State Office made a statistical report. From January to August, Wenzhou received a reported loss of US$148.4 million, an increase of 13.1% over the same period last year. The large increase in reported losses is a major dilemma for some time and space and regions: "This year's international financial crisis has spread and foreign demand has continued to slump." According to statistics, China Shin-Icein State Office issued an early warning that overseas bad-debt risks have risen this year. Wenzhou's overseas bad-debt ratio has reached 3%, reminding export companies to make preparations for investigating customer credit and prevent necessary risks. The countries and regions that need to be vigilant were also notified, including the former CIS countries (Russia, Ukraine, etc.), South Korea, the Middle East, and Europe, Spain, Italy, and Poland.

In Wenzhou, there are 49 fastener companies in Wenzhou, which have their own export performance, an increase of 14 companies over the previous year, of which 28 companies have exported more than US$1 million, up 9, while Wenzhou fastener products (steel products ) Become the county's largest export product, of which self-exports, foreign trade supplies, and domestic sales each account for about one-third. The prevention of bad debts overseas is equally important for Wenzhou's export enterprises.

Different regions, the same experience, from January to August this year, the China Xinzhou Insulation State Office has accumulated 359 insurance companies. As of October, China Export Credit Insurance has a total of 251 regular customers in Dongguan. Such as Kayidee Electronics, such an export as an insurance company to insure China's insurance, is even more rare. However, even if there are more than 200 companies in the first half of the year insured for export credit insurance, for the 10,000 export-oriented enterprises in Dongguan, the "251" figure is still scant. According to Wang Lijun, the reason is that the Office was established in Dongguan in 2005. In addition, the personnel input is also limited. The current total number of business personnel does not exceed 20. In addition, there is another important reason that most of Dongguan's export enterprises are processing trade companies, and the two are out. The insurance company is the factory manager of the mainland, and most of them are financial managers. These cadres are not heads of companies far away in Taiwan and Hong Kong. They have no right to make decisions, leading to slower communication decisions. However, the mainland factories are not insured and do not represent that the head office is not insured. Many factories in Taiwan and Hong Kong headquarter have chosen to buy insurance locally. “I personally make a bold speculation. With insurance coverage at the corporate headquarters, the insurance coverage of Dongguan companies should exceed 40%.” Wang Lijun believes that for the rest of the company, the awareness of cultivating its anti-risk can not be achieved overnight, it is a long-term meter.

Let go of the bad debts

"Dongguan's huge export scale cannot be without a professional legal institution that can cope with overseas risks." Wang Dong said that he is a partner of Beijing Shize Law Firm and has had experience in the legal field of international trade in the United States because it is the law of the Municipal Trade Promotion Association. As a consultant, he is familiar with the reality of overseas bad debts of Dongguan export companies.

Wang Dong expressed his expectations for the International Commercial Law Mediation Center in preparation for the CCPIT. This is a legal mediation center that establishes cooperation mechanisms with dozens of business associations and law firms around the world. It was approved by the China Council for the Promotion of International Trade last year. When a company in Dongguan encounters overseas risks and disputes, the mediation center can not only be low-cost, but also effective and efficient. The way to resolve commercial disputes is to better protect the commercial interests and commercial secrets of the company and maintain the existence of business partnerships.

"If we calculate the bad debt ratio of 5% according to the Ministry of Commerce Research Institute's sample survey, the amount of overseas bad debts in China and elsewhere is alarmingly high." Wang Dong said with excitement that if bad debts abroad do not attract sufficient attention from the government, the destructive power is very serious. Affecting the life and death of enterprises, even worse than no orders.

An exporter who was unwilling to be named was inexperienced with overseas bad debts. In 2010, he received a large order of millions of dollars from a European customer. After overjoyed to work overtime and finished delivery, the last customer, such as mud cows, entered the sea. “Only they got each other in the hand. 20% advance payment." Since then, the exporter's capital chain has been broken and companies have been unable to sustain themselves. They have to be dissolved and started from scratch with a dozen small workshops.

It is the lack of third-party agencies that deal with the risk of overseas bad debts, or the misjudgment of overseas risks by companies, which ultimately leads to the occurrence of risks. Wang Dong expressed deep sorrow at this. He believes that a mature export company should establish a credit investigation and assessment mechanism for each new overseas customer, including the assessment of the credit rating of the country where the transaction is performed; and a credit investigation of the target; Changes in the international economic environment.

"What's worse, many export companies still don't understand how to use financial instruments to diversify risk, so as to protect claims arising from overseas risks." Wang Dong does not seem to be able to understand the strangeness of conventional manufacturing companies in hedging financial instruments. "The lack of strict examination of the letter of credit does not allow the 'soft clause' to be detected in a timely manner and allows companies to make repeated moves."

According to Wang Dong, export companies rely on "export credit insurance," "factoring business," and "forfaiting business," all of which are very good for diversifying risks, but they have to pay a premium. "First-time contact with customers and large orders, the use of credit insurance is more reasonable."

However, we must admit that overseas bad debt risk is not a cold day. Export companies are not unaware of the damage caused by overseas bad debts. How to promote them to face and resolve risks is the current emergency strategy.