After the last group newsletter(
https://www.xing.com/net/investinbulgaria/newsletters-archiv...) focused on trade risks, I received numerous messages with questions about debt collection and credit reports. Since the subject is obviously of interest to numerous parties, I would focus on a few more details, that characterize the two services of Coface.
DEBT COLLECTION:
This is an OUT-OF-COURT service, which means Coface works on cases where the company(client) has not yet innitiated any legal proceedings against the debtor.
Main advantages of the service "debt collection" are:
-it`s effective;
-the unpleasant taks of collecting the due amounts is outsourced, so the management body and the employees can continue executing their daily tasks.On the other hand, the engagement of a third party(Coface] doesn`t mean that the relationships client-debtor would be harmed. On the contrary- the very act that Coface has engaged in a debt collection case usually prevents that from happening, as there is no direct argument between creditor and debtor, in which the chance for fast - escalating tension is very high;
-Coface works on a "success fee" basis, meaning a percentage of the returned amount of the debt. In other words, the client has no obligation to pay Coface before the debtor has liquidated his/her debts(the amount of the debt is transfered to the client`s bank account);
-as an international company, Coface engages in cases for debt collection both for Bulgaria and for debtors in foreign countries.
CREDIT REPORTS
A credit report is by definition a brief history and present situation of a company. Besides the general financial and legal data, they include the following two features :
1.CREDIT LIMIT or MAXIMUM CREDIT
When engaging in a business relationship with another company on deferred-payment basis, our clients turn to us for an advice about the maximum amount, for which the risk of delayed payments is low. The credit limit shows that- the amount in EUR, above which the risk for delayed payments is a lot higher, taking in consideration the researched company current financial situation and it`s general and projected standing on the market.
2.CREDIT RATING
The credit rating of a company is measured on a scale between 1 to 10 as 10 is the lowest risk possible.
Тhe actual scale number and it`s corresponding definition(High Risk,Above Medium Risk, Very Low Risk etc.)actually includes a lot of "soft" information, that is usually not visible to the clients and partners of the researched company. Payment morale, financial interaction between the researched company and other market players, projected standing of the company, based on its performance in the near past and its standing at present and lots of other data that Coface gathers via sources, usually closed for the general public.
I hope that the information provided here would be sufficient, in order for you to assess whether your company needs such services and how exactly they fit in your strategy for the end of 2009 and throughout 2010.
Of course, if you have additional questions on the topic, I remain at your disposal for such.
Kind Regards,
Petar Ilievski
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This newsletter has been written by moderator Petar Ilievski of the group "Investment Opportunities in Bulgaria".
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