My career in Europe at a particular time has given me a unique, privileged view of how the Credit Profession has evolved from, mainly, nationally-based Credit and Collection groups or functions to international groups collecting and managing risk across borders and, in some cases, on a global scale. These are my observations of this evolution and my personal interpretation of the impact that various factors have had on operational collection performance. It is my intention to record experienced-based reference points of interest to the reader, adding clarity to the myriad of cultural and political obstacles to effective international credit and collection.

The 1980s was the decade that started the move towards internationalisation. I was aware of two things: it would be a one-way road and it would accelerate. I was, and I remain, convinced that the vanguard of this movement was the influx of US multinationals (mainly high-tech) starting and expanding in the EMEA sales arena. It was brought into sharp focus for me when I was assigned by our US parent to assess collection performance data in our UK and German subsidiaries: why were the Germans returning better numbers with fewer resources than the UK?

This was, at the time, a typical and brutal question to come out of our US headquarters who, culturally, had no idea of how things worked differently in EMEA, not so much the blind leading the blind as the blind leading the partially-sighted. Managing the expectations, and education, of a US parent, was, and still is, an essential skill when running a Credit and Collection operation in EMEA or globally.

The Frankfurt Experience

On my visit to our German offices, it took less than two days to understand why it differed from the UK. On arrival, it was immediately noticeable that the office was quiet whereas UK offices were walls of sound generated by outgoing collection calls. At that time, the majority of German collections were based on customers receiving timely, accurate statements and invoices. Outgoing calls were rare, incoming calls were generally to chase statements/invoices to allow payment to be generated. In the UK there was a dial-for-dollars mentality, the building of a relationship with the client was paramount and statements were virtually ignored. The clincher at that time was that the German economy (pre-reunification) was culturally ‘pro payment, the UK was more neutral in that regard.

The review showed that both subsidiaries were operating at high levels of efficiency, blending perfectly into the cultural environment in which they were operating. The output from this exercise was gold dust in terms of understanding relative performance, reporting, goal-setting and setting corporate expectations. On the basis of the review, I decided to issue a broad guideline memorandum to our country groups to promote a better understanding of the cultural diversity that we had to manage.

The European North/South Divide

Further research indicated that Europe, from a perspective of cultural attitude to the collection, was broadly divided into three, developing into four, geographic groups:

Northern Group
Consisting of Norway, Sweden, Denmark, Finland and Germany. Germany was a part of this group up until the reunification of West and East Germany, after which it progressively migrated to the Central group.

Central Group
Consisting of UK, Ireland, France, Netherlands, Belgium, Austria, Switzerland. This group progressively increasing in size, was joined by Germany and the countries merging from Eastern Europe.

Southern Group
Consisting of Spain, Portugal, Italy, Greece. As Turkey has moved closer to the EU it has become a part of this group.

Northern Group Payment Culture

In this group the attitude is pro-payment: people and enterprises usually pay on time and there is an expectation that, if they don’t, they will be subject to late payment charges and robust legal remedies. In these counties the prevailing laws have tended to be supportive of the seller, commercially they are well understood and widely applied. Since Collection results out of the Northern Group are usually better than average, it doesn’t mean they are better collectors, or that collections are easier, but that payment culture and environment are perfect for collection operations. It also benefits from a focus on invoice defects, contractual problems with the seller,  adopting automated processes and emerging technology.

Central Group Payment Culture

By comparison, this group is historically more neutral in regards to payment culture: you do get paid but you have to work harder. There is also a degree of neutrality reflected in the prevailing laws. Phone collection is a big part of activities in these countries, this was actively developed over the 1980s and 1990s, spawning the emergence of collection technology supporting operations. During this period the influence which multinationals have had on payment culture within the group is undeniable. This influence has mainly derived from the US, itself a Central Group type of country. An increasing number of multinationals became operational with subsidiaries in many of these countries.

Southern Group Payment Culture

In the South, the culture is distinctly in favour of the buyer and the laws, which are mainly developed from the Napoleonic Code, reflect this. In these countries, payment performance is poor and extended terms of payment are frequently requested. People often become confused about the link between payment performance and terms of payment. Cultural payment performance is always relevant and should be considered when setting collection goals and reporting results. This is absolutely not the case with terms of payment. In 30+ years of operational international credit management, I never once agreed to extend payment terms despite this being the most frequent request. This could be construed as a lack of pragmatism on my part, in fact, it was the opposite. There are several compelling reasons for never extending terms:

The operational solution is that you can tolerate deviant payment performance rather than change the terms of payment. The agreed solution is properly reflected in goal-setting and operational reporting. The cultural dimension is that, if you change your terms from 30 to 90 days (when payment performance is 90 days), your payment performance, driven by culture, will increase to 120 days. The risk dimension is that risk will immediately rocket as collection activity will shift to the new due date, this will put pressure on already set credit lines and, if insured, on the insurer’s credit limits. The legal dimension is that the initial point of legal action will move out to the date of due payment, any application of late payment remedies or charges would only be valid from the point of default. Speculatively, although I have never checked, I have wondered whether extending payment terms to one EU State and not others would be in violation of EU Competition Law. At the time of writing, this may the least of our problems.

Migrating Countries from Eastern Europe

This started in the 1990s and has since gained significant momentum. There has been a distinct East to West progression, as the counties involved moved from controlled economies to embracing free-market commercial practices and culture. One example is a reunified Germany moving out of the Northern Group into the Central Group, as they faced a controlled to free-market shift.

Although difficult to be chronologically-accurate, it is reasonable to say that the Czech Republic, Slovakia, Hungary and Poland were in the van of this movement, other significant factors came into play that drove the adoption of Central Group cultural practices. Again, the influence of multinationals was seen as the move towards International Shared Service Centres for collections emerged either in-house or in a BPO environment. At the outset, management of these centres was exclusively by ex-pat Western European or US mangers, bringing with them Central Group practices and culture.

Multi-lingual, mainly graduate candidates were recruited locally to fill other positions within collection groups. This action, taken as a necessity, almost accidentally gave the Credit Profession an immense boost in the quality of practitioner in Central and Eastern Europe; most lower-level positions in Western Europe and the US were not recruited at the graduate level. In the last few years, we are beginning to see locally-grown talent emerging in senior management roles in these SSC’s. This rolling progression has continued in Eastern Europe with the Baltic States, Romania and Bulgaria developing along similar lines.

Russia and the former Soviet States should, from my experience, be viewed separately, they must still be regarded as politically unstable with high levels of criminality. During the mid-‘90’s I ordered the withdrawal of our investigation team from Moscow after they had discovered the method and value of fraudulent activity within our Russian subsidiary. Although we dismissed the perpetrators, it was made very clear, by an external organization, that further action by us would result in physical harm to our team members. Though the whole region has significantly improved since then, great care still must be taken and it will be some time before we experience Russia merging with European Culture

The Significant Positive Influence of the European Union on Payment Culture

The EU has been maligned for many things, including not doing enough to improve the collective payment culture across the Union. This is unfair, given that there was an early recognition that regional variations in payment culture and practice were neither good for business nor for the reputation of the EU as a credible and responsible trading partner.

It was also recognised that the Northern Group Cultural model was, in a professional and practical sense, far superior to all others and that energy, efforts and initiatives should focus on culturally driving countries to the north and west. This was always going to be an enormous task, given the complexity of the EU and its constituent parts. It is my view that the EU has embarked upon this task and have had some direct and indirect success. Over the years EU directives have often been criticised as too little, too late and weak in nature. My view is that these are always better than nothing, to be viewed more as a statement of longer-term intent.

In a less direct way, the EU has been actively-encouraging national governments to introduce national legislation in support of prompt payment. Credit Institutes in most countries have also been anxious to support this, many member countries now have legislation in place. The EU, local government and national institutions should be highly-commended for these efforts. It is of critical importance that Credit Professionals, tasked with collection in these countries, are completely aware of local legislation and the remedies these bring.

Although the Euro was introduced for a higher level of political and economic ambition, there have been significant advantages of the single currency to the international collection. After overcoming initial, and expected, teething troubles, dealing with one currency make currency fluctuations, pricing and cash flow predictions more manageable.

Brexit the Final Countdown

This article is published in early-October of 2019, three months before the dawn of 2020, the end of the period being reviewed. Brexit, in my opinion, will bring a multitude of economic problems, many of which will impact the Credit Profession. As a Credit Professional, I must comment dispassionately on the possible impact a Brexit without a deal might have on international collection operations. Immediately after the Brexit referendum, AICDP polled ten of its top International Collection Centres to examine and predict impact.

Of the ten questioned on the value of their portfolio in the UK, seven had the UK at number one, two had the UK at number two and one had the UK at number three.

  • Of the ten, nine centres were located outside the UK and one was located within.
  • All ten expected to see up to a 10% downgrade in collection performance in the first quarter after Brexit.
  • All expected transport and customs delays but could not predict for how long.
  • None thought that currency exchange would be an issue because that was the same situation as now.
  • All thought the value of Sterling would be an issue, impacting both payment performance and risk management. All this data is speculative, nothing is conclusive, but it portrays a worrying outlook.

Operational Predictions

All entities operating a UK portfolio will experience an initial deterioration in the speed of cash collections from UK customers. Businesses, particularly multinationals, will have planned for disruption and will recover within two quarters. The major area of increased risk will be within the UK SME sector and already-vulnerable enterprises. Brexit will represent the biggest challenge that International Credit Management has ever faced.


AICDP as an organisation continues to monitor and assess developments, standing ready to support our great profession in every way possible. I hope this article is of interest to Credit Professionals, who may want to disagree with or add to my observations, the generation of discussion is welcome.

Bill Dunlop – President AICDP
08 October 2019

During the period this article covers Bill held senior Operational Credit and Collections positions in the engineering, banking, brewing and, principally, IT sectors. At the beginning of the new millennium, he started his own consultancy and training company, gaining exposure to other sectors, including pharmaceuticals, domestic appliances, apparel, transport, automotive, advertising and manufacturing.