Companies often find themselves in financial difficulties, which prevent them from making payments on time. Before starting cooperation with a new partner, it is necessary to make sure that the promising client will pay his bills on time. How to avoid potentially late debtors?

1. Control of debtors. Before providing post-payment to the client, it is worth checking the financial status of the partner. This can easily be done using the information provided by Lursoft and credit bureaus (such as Crediweb). An automatic risk assessment tool is also offered by Okredo, a company that recently started operating in Latvia. When checking the company, it is worth paying attention to such indicators as current tax debts, the amount of equity capital, entries in defaulters' databases and the amount of existing financial obligations. It is important that the company has its own internal (albeit simple) policy on in which cases post-payment is granted and how such post-payment amount is determined and renewed.

2. International databases. Before starting cooperation with a new foreign client, it is increasingly necessary to make sure of the client's reliability and solvency. Information about each company can be found in the company register of a specific country, for example Germany, Great Britain or Sweden - information about late payments and tax debts can provide a deeper insight into the company's payment discipline. It is important to verify the security of the company from the perspective of money laundering risks by checking whether the company and its related persons are not included in the sanctions lists here and here.

3. A debtor control mechanism has been developed. If a customer starts to fall behind on payments, it is important not to shy away from solving the problem and take controlled steps to recover the debt. Many companies have pre-established procedures for what to do if a customer is late on payment. In the first days of the delay, it is recommended to contact the customer by phone or electronically and find out the reason for the delay and the potential repayment time. If the payment is delayed for a long time, it is recommended to gradually send various warnings to the client about publishing the delay in public databases. However, if the customer continues to delay payment or cannot be reached, it is necessary to contact a debt collection specialist who would deal with debt collection through court.

4. Accounts receivable insurance. For businesses with high sales volumes and long payment terms for customers, factoring or receivables insurance provided by a financial institution is a suitable solution to avoid receivables. It is easiest to insure debtors in international transactions that are carried out on a relatively large scale. Such insurance services are offered, for example, by Marine Services Group, Credeo. In international transactions, credit risk insurance is offered in the form of an Altum credit guarantee instrument.