How do I successfully collect outstanding debt in Dubai?

Business owners  and finance departments operating in the UAE often ask the question that “How do I collect the outstanding dues” or “What do I do if my customers are not paying” and really there is not one single answer to this except that one has to be proactive from the start to prevent such situations arising or at least limiting the chances of having outstanding debt.

Google will tell you that if you have outstanding collections in Dubai the best option is to file a case through a lawyer and whilst this is correct the reality of this process is time consuming and costly. Whilst in some instances the mere legal filing will result in a resolution some seasoned debtors know that it is a long road and may still not result into a successful outcome.

The Dubai Mediation centre is also an option which is a cost-effective solution where a debt case can be registered and the centre acts as intermediaries to help find a solution. The costs are reasonable and, in some cases, where the other party is willing to co-operate it can be an effective solution.

Whilst these options exist, I believe prevention and limitation are a much better strategy and there are processes one should try and implement from the beginning which can prove useful should the need arise that a customer or partner are not paying their dues.

1. HAVE AN ENGAGEMENT CONTRACT!!! (IT’S A MUST)

The first recommendation is that when engaging into any business relationship a contract should be created. Engagement contracts don’t have to be pages and pages of legal jargon instead major points highlighted and addressed. In some instances it may be a small transaction however it is good practice to implement agreement contracts for each and every client.

As a business you will incur the cost once to create an agreement and then each time there are only minor amendments for each new client. Whilst it seems such an obvious process to have implemented many businesses overlook this and suffer the consequences later.

An engagement contract should cover the basics such as both parties information, business addresses, contact information and confirmed names of the authorized individuals that are becoming a party to the agreement. This should be followed by defining the terms of business or service including the renumeration and charges to be paid. Defining payment terms and penalties is also crucial when relying on these factors later should the worse happen. Finally the legal jurisdiction should be defined in case of a dispute followed by the usual signatures and dating the document. Whilst this is the most basic of requirements one can tailor the agreement in more detail but at minimum these terms should be listed.

2. KYC DOCUMENTS ARE CRUCIAL

When engaging with a new customer or client this is the honeymoon stage where one should ensure the ground works are laid firmly and that each party is well acquainted with each other. It is very normal in the GCC region to request a copy of the trade license so don’t be afraid to ask for it. This helps to identify that the client is licensed and up to date in their business affairs. The trade license also identifies the beneficiary/ies and the authorized personnel of the company so one can be sure that the persons they are dealing with are the correct individuals. Having these documents on file also ensures that if legal or court actions are required the minimum documentation is already on hand. It is also good practice to update these as when from the client if it is an ongoing long term relationship.

3. ISSUE CORRECT AGREED FORMAT INVOICES

Having established that a relationship exists due to the engagement contract that was entered into above another important point is that Invoices should be issued on time and formally submitted through the agreed communication channels to the defined addresses as agreed in the engagement contract. Whilst this seems so obvious, we have experienced on so many occasions that debtors claim they have not received invoices, or the format of the invoice is incorrect. Whilst they may be delay tactics it is important to rule out such factors and again its normal business practice to follow such industry standards.

4. TAKE ACTION IMMEDIATELY

As a debt collections specialist of 15 years in the UAE what still shocks me is how much time businesses allow to pass before they take any action against a debtor. We have received some cases that are from 10 years ago and the owners have died. At minimum our typical cases are 9-12months old and we come to consider these good whilst the average age of a debt is 18months onwards. The longer a default customer is left the more difficult it will become to collect a debt. As time passes employees can change, the circumstances of the business can change and many other factors which could be taken into consideration. As a business you must be consistent and proficient at this point. If a client, customer or business partner is defaulting and not paying their debt/invoices on the agreed date then one should immediately establish communications via the channels previously used highlighting the concerns and requesting settlement as per the agreed terms. If there is no response or an insufficient one, then a physical or online meeting should be requested to discuss and resolve the situation. The maximum time a debt should be allowed to go overdue is 30-45 days over the agreed timeline before action should be initiated.

Whilst these processes will help your business to limit the exposure to debt there will unfortunately be situations and customers that just wont pay. In these instances, I still recommend that the initial best course of action would be to engage a reputable debt collection firm. In recent years the number of companies offering collection services have increased but it is important to work with a specialized business collections specialist.

In our experience many collections agencies that offer a no win no fee proposition typically involve numerous cold calls and empty threats which most of the time are absolutely ineffective. This is also very damaging and will inevitably delay collections or even worse leave only the option of court action which should always be a last resort due to the costs and time.

At Nasiha we have been successfully collecting outstanding dues in the GCC region for over a decade and specialize in B2B collections. We have refined our processes over a decade and our methodology is based on the collections processes defined by the UK FCA. All our agents are extremely well trained and follow a strict process orientated approach which has resulted in our extremely high collections success rate.

To learn more about our collections process or if you have outstanding debts you may contact us at Nasiha via email at info@nasiha.ae or our specialists can be reached on +97145762814