Euler Hermes study: Comparison of collection procedures in the 50 most important trading nations
Euler Hermes study proves: Switzerland shows the least uncertainties in the payment of due receivables. Nevertheless, Swiss SMEs cannot transfer these good conditions to their foreign business. Local law applies to debt collection procedures, which can differ significantly from Swiss practice.
In its new study "Collection Complexity Score and Rating", credit insurer Euler Hermes provides an insight into debt collection procedures. Euler Hermes shows how complicated it is to collect money for outstanding invoices in the world's 50 most important trading nations via a complexity score of international collection procedures based on three main factors:
payment practices,
the local court proceedings,
and the insolvency proceedings in the countries concerned.
This results in a ranking to help companies navigate their international trade activities.
Western European countries in the lead
With a global average score of 51 on a scale of 1 (no degree of complexity) to 100 (high degree of complexity), Western Europe tops the scale with the simplest collection procedures. Sweden, Germany and Ireland in particular have the lowest levels of complexity, with scores of 30, 30 and 31 respectively. Sweden leads the ranking with the best payment practices, the simplest court procedure as well as the most effective insolvency law.
In absolute and relative terms, Europe has the highest number of countries categorised by Euler Hermes as having the lowest level of debt collection complexity. 14 out of a total of 16 European countries surveyed are categorised as "less complex", while Greece and Italy are the exceptions with a high level of debt collection complexity.
Legal costs in Switzerland: advance at the expense of companies
The Euler Hermes study shows that the largest economies, the most dynamic markets and the most solid countries are not characterised by business-friendly framework conditions in all areas. In Switzerland, too, there are difficult aspects to the debt collection process.
"Following the standardisation of the Code of Civil Procedure, companies now have to pay the court costs in advance. However, many SMEs cannot afford the high court costs and are therefore unable to enforce their rights," says Stefan Ruf, CEO of Euler Hermes Switzerland. This is particularly problematic for the large Swiss exporters, mostly medium-sized companies. Unpaid invoices can quickly threaten their very existence. "That is why a comprehensive assessment of the contractual partners from the outset is a more reliable basis than relying on standard dunning procedures - especially in countries with complex framework conditions. Generally speaking, if the money hasn't arrived after 60 days, it's high time to call in debt collection experts with international experience."
Depending on the canton, court costs can also vary considerably:
Dispute value CHF 20,000: costs between 8,000-50,000
Dispute value CHF 100,000: costs between 20,000-100,000
Amount in dispute CHF 1.5 million: 125,000-500,000
Bringing up the rear: the Middle East
At the other end of the scale, the Middle Eastern countries Saudi Arabia and the United Arab Emirates rank as top performers in the complexity of debt collection procedures. With a score of 94, the international procedure in Saudi Arabia is three times as complicated as in Sweden.
78 out of 100 complexity points on the collection scale means third place for Malaysia, followed by China (73), Russia (72), Mexico (70), Indonesia and South Africa (67).
You can find the complete study here
