Effects of COVID19 on Debt Collection in Turkey

Together with the ongoing pandemic of coronavirus disease (Covid19), we all witnessed and remembered the importance of ‘Digital Transformation’ among many other issues. We live in a world where companies can buy and sell goods to companies outside their borders even without traveling to another country. And today, when it comes to ‘international receivables’, most people wonder whether they will be able to collect their foreign debts or not. As the founder and managing director of ‘an international collection agency’ in Turkey, I aim to address this question in this article and share my experiences since day one we heard about coronavirus. I also would like to highlight how ‘Digital Transformation’ today facilitates our adaptation to the drastic changes. In the end, I will share 7 tips for companies during these difficult days to overcome Covid19.

Since the spread of coronavirus within China during January 2020, here is the list of questions which are mostly raised both by our Turkish and foreign clients;

*‘Are you still able to collect our debts from a company in China whereas the country is lock-down from coronavirus?’

*‘Shall I keep importing goods from China whereas there is the risk of infection coronavirus through cargo?’

*‘Do the courts still operate in China under the difficult circumstances concerning the coronavirus and what can be done if a case is not solved through prelegal debt recovery and must go legal?’

Since the spread of coronavirus within Europe at the beginning February 2020, the same set of questions started to be raised both by our Turkish and foreign clients, but this time concerning the companies located in Europe;

*‘Are you still able to collect our debts from a company in Italy whereas the country is lock-down from coronavirus?’

*‘Shall I keep importing goods from Germany whereas there is the risk of infection coronavirus through cargo?’

*‘Do the courts still operate in Spain under the difficult circumstances concerning the coronavirus and what can be done if a case is not solved through prelegal debt recovery and must go legal?’

Since the spread of coronavirus within Turkey since 10 March 2020, the same set of questions started to be raised both by our foreign clients, but this time concerning the companies located in Turkey;

*‘Are you still able to collect our debts from a Turkish company whereas serious measures are taken concerning the coronavirus?’

*‘Shall I keep importing goods from Turkey whereas there is the risk of infection coronavirus through cargo?’

*‘Do the courts still operate in Turkey under the difficult circumstances concerning the coronavirus and what can be done if a case is not solved through prelegal debt recovery and must go legal?’

Some of the answers to the above mentioned questions do not vary due to ‘the country’ or ‘the timing’ of a given response, such as ‘the risk of infection through cargo’. The World Health Organization has advised that it is safe to receive international letters or packages as, coronaviruses do not survive long on objects, such as cargo services.

Some of the answers to above mentioned questions have been varied due to the ‘timing’ of a given response such as ‘the operations of courts’. In Turkey, courts were operating normally until 23 March but since then, the courts have largely suspended their operation and only objectively emergency matters are currently handled due to coronavirus. Similarly in China and Europe, courts were operating normally until certain cities were lockdown, but since then, the courts have largely suspended their operation for a specific time period.

Some of the answers to above mentioned questions have been varied due to the ‘country’ based policies such as ‘the operations of collection agencies’. In Turkey, debt collection agencies are mostly formed as a call center and operate under the umbrella of ‘financial and administrative consultancy services’ which allows them to continue their operations. The main difference occurred in the ‘form’ of operations and most of the debt collection companies in Turkey have started to continue working from ‘home’ in order to reduce the spread of coronavirus. Thanks to the ‘Digital Transformation’ today, our adaptation to the drastic changes is facilitated.

The Short Story of the Pioneer Debt Collection Agency in Turkey

The company I founded in 2011, ARS Consultancy, is also a debt collection agency but not in the form of a call center. Of course, phone calls are also one of our major tools to negotiate with Turkish debtors, but we give equal importance to written communication such as emails and posts. In our debt recovery approach, we value ‘the continuity of business relations’ between debtor and creditor while attempting to collect outstanding debts before legal action. Understanding the reason of the delay and assisting debtors to make payment plan in line with their budget also matters. Especially today, the world-wide difficulty due to coronavirus, makes this approach even more important to convince Turkish debtors to prioritize their payments to our clients. This amicable approach is also highly adopted in our business model, which mostly concentrates ‘B2B’ and ‘international’ cases.

In 2007, I was acquainted with this business while I was an Erasmus student in the Netherlands. After I graduated from Political Science and International Relations at Bogazici University (Istanbul, Turkey), I went back to the Netherlands and completed my Master’s Degree at Tilburg University within the field of Organizational Sciences on ‘Management of Cultural Diversity’. That led me to focus on a business that should be ‘international’ and in 2011, my journey at ARS Consultancy started.  Until then, the only asset I had was the passion of being a young woman entrepreneur and the know-how of ‘debt collection’ which I had accumulated in the past 3 years because I had been doing business all around the world with different debt collection agencies. After that, I had been traveling around the world and attending the conferences of associations and joining professional groups of  the international debt recovery industry. My attention was mainly concentrated on the needs of foreign clients to collect their receivables from Turkish companies and people. That’s why ARS Consultancy was born as the pioneer debt collection agency in Turkey focusing on international cases.

Working From Home in Turkey Due to Coronavirus

Our operation team composed of 20 people and since 16 March 2020, all arrangements have been set for all our team to continue their operations from home without interruption to fulfill our commitments to our customers and business partners. We have the capacity to collect in all 81 cities of Turkey and still do. Our team is composed of experienced debt collection agents who are native speakers in Turkish and also fluent in English. In addition to their financial knowledge, familiarity with local customs and culture, our agents are trained in negotiation, conflict resolution, and other negotiation techniques. This emphasizes our commitment to amicable debt resolution. We do not let cases go easily and make sure all negotiations/persuading skills/settlement offers are exhausted before advising legal action. We believe in investing in the collection effort and we have a 78% success rate on claims younger than 1 year. We all pay extra effort to keep this hight success rate in 2020 too despite all negative and unexpected developments due to coronavirus.

Of course, the delays in payments of Turkish companies and individuals have raised due to coronavirus since mid-March 2020.  The first and obvious reason is this: ‘keep the cash in hand’ because the near future is uncertain. The second reason is the suspension of Turkish courts until the end of April and as a result, an obvious delay of the legal system for outstanding debts. We do understand that these 2 main reasons which are mostly raised by Turkish debtors (as well as foreign debtors) make sense. However, it is also clear that these days of ‘inaction’ will end soon and legal system will be there to protect creditors in Turkey and all around the world. Hopefull, in June 2020, companies will be back to business and slowly start their operations, trade, export and import. And until then, if debtors continue to postpone their payments, there will be accumulated interests and collection costs. In order to prevent this massive payment obligation in the near future, it is better to be flexible to collect partial payments until bulk payments will become possible. Patience and tolerance are among the best keys for April and May 2020, for international debt recovery. Additional measures can also be taken as I have outlined below.

7 tips for companies during these difficult days to overcome Covid19

Below, you can see my recommendations for companies that can benefit from minimizing the damage of coronavirus, no matter they are in the position of a creditor or a debtor.

1) Cut your expenses and introduce savings measures to your company

2) Stay updated by following both the local and global news from reliable sources

3) Plan for the next 6 months based on two scenarios: optimistic and pessimistic

4) Observe your current status weekly in regard to these two scenarios

5) Change the plans if necessary and be able to adopt changes quickly

6) Prioritize your payments and negotiate with your suppliers for a temporary flexibility

7) Be open for negotiating with your clients for temporary flexibility to collect your receivables

I also hope that you, as the reader of my article right now, are healthy and well. We will all get through this ordeal at soonest and with the minimum losses. A new era with more hygiene and more digital oriented systems is beginning.

 

Ayse Burcu Arslan Demirtas

Founder & Managing Director | ARS Consultancy