Jan 21, 2021
Written by Diana Mota, FCIB
Nearly 20% of credit professionals who responded to the December FCIB International Credit & Collections Survey said they were experiencing an increase in payment delays in Mexico. About 10% noted a decrease; 62%, no difference; and 10% were not experiencing any delays.
The majority of respondents offer payment terms of up to 60 days. About 23% offer 61-90 days, and about 5% do not offer terms. The top three contributors to payment delays were cash flow issues (42%), customer payment policies (16%) and cultural norms and customs (11%). Average number of days beyond ranged from none to 75 days.
“Mexico’s economy is extremely volatile, and it is customary for customers to try and negotiate credits when they are extremely past due,” a respondent noted.
Advice for companies new to doing business in Mexico included the use of credit insurance and financial statements. Several respondents stressed researching and getting to know customers well. One pointed out that creditors should expect delays regardless of the payment terms extended.
“Collections in Mexico can be difficult and complex,” a credit professional warned. “Corruption is still an issue.”
Trade credit insurer Euler Hermes’ collection profile on Mexico notes the law does not provide a framework for standard payment terms. “It is common to rely on 30-day credit terms starting from the date of the invoice. In practice, payments take place within 40 to 50 days on average, while delays of 15 to 30 days may be expected.” The firm rates collection complexity and complexity relating to payments and court and insolvency proceedings as severe.
The December 2020 International Credit & Collections Survey also covers Australia, Canada and New Zealand. FCIB members can access the full results of the survey as well as the survey archives via the FCIB Knowledge Center. Nonmembers who participated in the survey will receive the results via email. Participation in the survey guarantees you will receive the results whether or not you are a member and furthers the collective knowledge of global credit professionals by sharing real-time credit and collection experiences. The monthly survey is open to all credit and risk management professionals.
The next survey will open Jan. 26 and will cover Chile, Guatemala, Honduras, and Trinidad & Tobago.
Romelio Hernandez, of HMH Legal S.C., will present 11 a.m., Jan. 28, the webinar, What key factors should credit managers consider in order to mitigate risk when selling to Mexican buyers on credit? He will share best practices and techniques for performing due diligence on prospective buyers, as well as review basic documents for securing credit sales to enhance the creditor’s position in court if debtors’ default on payment.