In 2020, with the impact from the pandemic outbreak, and the uncertainties of the epidemic trend, countries are encountering an unprecedented crisis as a result of regional lockdowns and restrictive measures. The global economy is suffering a severe recession, with catering, manufacturing and retail industries bearing the brunt of the crisis. The current global pandemic has made it incredibly challenging for businesses to maintain their cash flow. The tide of bankruptcy is on the horizon. Local and overseas companies are concerned about collecting debts from China, as they are unfamiliar with Mainland laws and culture, while the epidemic has caused payment delays. In this blog, we share a recent case in which RMS successfully collected over 1.8 million Euros for two overseas clients from the same Chinese manufacturer, by leveraging our years of collection experience and RMS global network.
In the first quarter of this year, we were commissioned by two creditor clients in Hungary, a medical device company and a gyrocopter company, to collect a total of €1.8 million that had been outstanding for more than a year by the debtor, a paper company located in China. Upon receiving the assignment, RMS contacted the paper company immediately. As it was at the peak of the epidemic, the company had already ceased operation and we were not able to contact the person-in-charge. Nevertheless, our collection team did not slow down but instantaneously investigated the company and related parties, and found out that the paper company was already heavily indebted, and some of the debts were guaranteed by the company's shares. In addition, the majority of the shares of the paper company were owned by another company with which they had an intricate and complex relationship.
The collection team not only obtained the above information within a week, but also contacted the key responsible person for negotiation. This person-in-charge claimed excuses of the pandemic outbreak causing operation suspension and low cash flow. Before the negotiation, RMS found out that although the paper company had ceased operation, they were selling household paper products under another name in two of the largest online stores in China, benefiting and profiting from the pandemic driven shift to online shopping. After several negotiations, the person-in-charge of the paper company promised to pay the first creditor - the medical device company. In the end, the medical device company was able to recover the full amount of debt within one month since the case was assigned to us. They appreciated and thanked us for recovering the outstanding amount so efficiently and effectively.
RMS continued to collect debts for the other creditor client – the gyrocopter company. However, the total amount was too large to be paid directly to the client's Hungarian bank account due to the domestic foreign exchange control policy. The gyrocopter company was facing liquidity problems, as the supply chain of most SME was being impacted by the severe epidemic. Its business had plummeted to a loss and this debt, if recovered, would become an important source of working capital. With RMS’ negotiation and assistance, this case was solved as fully paid within two months, helping the gyrocopter company to tide over the difficult times.
As the epidemic drags on, SME managers must carefully review their business, cash flow, supply chain, investments and risk management. In times of crisis, RMS often receives cases from multiple creditors to collect debts from the same debtor. As the above case shows, it is more effective to seek experienced professional help, compared to collecting the debt on one’s own. It is important to act fast in debt collection, otherwise nothing could be recovered when the debtor closes down or goes bankrupt. With over 30 years of experience in Hong Kong, RMS has witnessed and experienced many financial crises, and the impact of this epidemic has been widespread and hit the hardest. RMS global network of more than 190 countries together with our in-country debt collectors could effectively collect local or overseas debts despite of epidemic, regional or cultural boundaries.
Photo by Jeffrey Swanson on Unsplash
© 2023 Receivable Management Services (HK), Ltd, an iQor Company All rights reserved.