Companies are finding it hard collect debts, putting them at risk of defaulting with their own partners.
With harder sales, companies are struggling with debt collection
“Almost all the enterprises I know are having trouble with working capital. The largest headache is the sluggish collection of debts, especially bad debts. Many of my friends have been compelled to evade their partners despite owing debts worth tens of billion of dong as they haven’t been able to recover equivalent debt from their clients,” said Nguyen Dang Hien, General Director of Tan Quang Minh Manufacture and Trading Company Limited (Bidrico).
Difficulties
Nguyen Thi Hong, owner of a fabric wholesale enterprise in HCM City’s Tan Binh Market, is troubled by having to recover debts worth nearly VND1 billion (USD47,778) from a garment firm in District No. 12. She has no other choice but to assign two staff members to work on claiming the money back.
Hong said, “Under our contract, they should have settled their payment with us in June. Due to our long-term cooperation, I was compelled to allow them to defer their payment until July. However, up to now, they have yet to pay their debts.”
She shared that she was happy selling goods to the company during the period when the economy was struggling, but she now realised that recovering debts was ten times harder than marketing and sales.
Nguyen Thi Thuy, from a trade and communications service company in District No. 1, had to ask for help from lawyers in order to collect a debt of VND30 million (USD1,433) from a client in Hanoi. Despite it being such a small debt, it took Thuy months to recover it.
“Prestigious clients such as supermarkets who are renowned for on-time payments, with some deferring their payment for up to five days at most, while other groups of clients often have a one-month deferment period,” said Le Thi Thanh Lam, Deputy Director of Saigon Food Company.
According to Lam, the company had incurred losses of dozens of millions of dong per contract due to deferred payments.
Due to the painstaking nature of debt collection, Pham Ngoc Thuy, owner of the Thanh Long Confectionery Company, plans to only sell their products to supermarkets, instead of private stalls and retail agents during the coming Tet holiday.
Coping with mounting deferred payments, Dong Hung Trading and Services Company has set up a group that specialises in collecting debts under the direct supervision of the company’s general director.
Discounts for quick payment
Many companies have taken various measures to minimise deferred payments, said Phan Van Thien, Deputy General Director of Bienhoa Confectionery Corporation (Bibica).
Bidrico has decided to speed up their production in order to shorten capital turnover to only 15 days, instead of a previous 45 days.
Nguyen Dang Hien, Chairman of Bidrico’s Board of Directors shared, “We have also launched different promotional programmes, including a discount of up to 5% for clients who immediately pay in cash.”
Other firms have applied discounts of 1% to 1.5% for clients in a bid to encourage quick payments.
