Asian companies prefer to outsource debt collections: study

Source:Xinhua Published: 2013-4-22 16:46:25

Most Asian companies choose to outsource debt collection given the great difficulty involved with settling mounting invoices, according to recently-released study.

According to Global Collections Review, released by international debt collecting firm Atradius Collections, 16 percent of executives in Asia Pacific countries said it is "highly likely" for them to outsource their collections, while 34 percent said it is "likely" for them to do so.

In an interview Monday, Tony Au, senior regional manager for Asia Pacific for Atradius Collections, said debt collecting in the region is "more challenging and tends to take longer to resolve."

Au attributed this to several factors including "the business culture, language barrier, and issues regarding jurisdiction."

"The legal proceedings in Southeast Asia usually takes many years, need multiple hearings before a final judgement is handed down. The solicitors'fees are not cheap and upfront payment is expected," Au said in an interview with Xinhua.

Atradius Collections, an Amsterdam-headquartered company, has several offices worldwide. But it's now strengthening its Southeast Asia office owing to a fast growing demand in the region.

Atradius' Southeast Asian office, which is based in Singapore, handles all collections activities for the region, including Brunei, Cambodia, Indonesia, Laos, Malaysia, Philippines, Thailand and Vietnam.

Raymond van der Loos, managing director of Atradius Collections, said South East Asia-based companies have had to grapple with the difficulty of convincing partners to settle their debts.

"While some companies do it within their organization, outsourcing it to a debt collection agency makes the process smoother for all parties concerned," he said.

This is because collection agencies, such as Atradius, uses negotiation and persuasion techniques to convince a debtor to pay hence avoiding costly legal battles caused by unpaid debts.

This is why, Au said, most creditors will rather assign their debts to a collection agency than to proceed legal actions to pursue their debts.

"Credit information and litigation records are easily available in the region. It's difficult to estimate the creditability and ability to pay of the debtor," he added.

But Atradius officials said outsourcing debt collection will not only benefit homegrown companies. Asia, after all, is home to some of the world's fastest growing economies, luring global firms to establish offices here, tempted by the growing market. In Southeast Asia, in particular, many global companies have set up their regional office in Singapore to serve the South Eastern region.

Despite the market potential that Asia presents to global companies and investors, they are also facing challenges when collecting in the region. They need to know about local taxation and the legal systems. Atradius officials said debt collecting companies will definitely help them handle these challenges.

Posted in: Companies

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