Wednesday, 18/06/2008 17:09

Businesses struggling with claiming debts

After two hours of waiting, Nga, Director of a media company in Hanoi, finally met the partner, an insurer. She spent another two hours urging the partner to pay his debts. What she got after four hours was a promise by the partner that he would pay the next week.

The director of the insurance company promised to pay the following week, but the debt of VND1bil will be paid in 10 installments, VND100mil each time.

“Collecting debts has never been as hard as nowadays. You are the creditor, but you have to beg for debt payment. Creditors and debtors dare not look into each others’ eyes, because they are long-term partners,” Nga said.

For the last three weeks, Nga has been doing only one job: claiming debts. Her company needs to ask its partners to pay VND5bil worth of debts, while only VND50mil has been paid so far.

When Nga calls partners or goes directly to partners’ offices, the partners always promise to pay debts ‘very soon’. However, these turn out to be vain promises, as no one has come to pay debts as they committed.

Nga said that lacking capital is the biggest problem now for all businesses. Therefore, if her company does not claim debts right now, the debts will become bad debts in the near future.

For the last two months, businesses have been facing big difficulties as banks are trying to limit loans while raising interest rates continuously. As a result, businesses have been trying to cut expenses and cancel contracts. Nga’s company, an event organisation company, does not have a lot of work these days. Therefore, Nga and her colleagues have to focus on claiming debts.

A Hanoi-based technology company is also miserable as it cannot collect debts. On average, the company gets some $10mil in turnover a year. However, turnover has remained on paper so far this year, as the company’s partners have been delaying debt payment – an estimated $5mil.

In early June, the company decided to limit signing new contracts, while spending most of its time collecting debts. Leaders of the company have even called on staffs to cancel summer vacations to focus on collecting debts.

In previous years, collecting debts was considered the job of the last months of years. However, companies all are trying to collect debts as soon as possible for fear that partner companies may not pay the debts due to the economic difficulties.

Son, the director of a computer company, related that two weeks ago, a woman came to his shop to buy a latest-generation computer at VND24mil. Son accepted late payment, since the woman was a relative of his. However, when the client was urged to pay debts several days ago, she said frankly that she had no money to pay as she has lost with securities deals. Finally, the client asked to pay by installments, VND2mil each month.

Son said he will have to close his shop if he has more clients like that woman.

Son said that on the books, the turnover of his company has increased by 20-30%, but the money is now not in his coffers. Partners aren’t paying debts because they don’t have money and they also have to claim debts from their partners.

“The market these days can be described as a construction site: full of commodities and debts lying about in disorder and in the way.

In order to avoid bad debts, companies have launched new business strategies. They only deliver products if partners pay immediately for the products. Loyal partners can enjoy deferred payment on 8-10% of products’ total value instead of 20% as previous.

VNN

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