Getting Customers to Pay -- Around the World
It was 1 AM. I was sitting in the bed of a Mitsubishi delivery truck with a load of bicycle racks, hurrying to the last location to meet the installation deadline for the 09/09/09 opening of the Dubai Metro. At one point, I’d been pretty excited about this project – it represented the second-largest order our company had ever received. And that’s when it hit me. We may never get paid for this job. And there was nothing we could do about it.
Our team had been in Dubai for a few weeks, getting ready to perform installations all over the city. Through the grapevine, I had started to hear that even the large multinational vendors on the project were not getting paid, to say nothing of tiny companies like ours. In the U.S., customers that refuse to pay get taken to court, have liens filed against them, or even have collections agencies sent after them. In Dubai, business is done much differently, and we hadn’t made any preparations to enforce payment.
In retrospect, it was easy to see where we had gone wrong. Mostly, we had failed to consult with our local government officials. After my ‘aha’ moment in the back of the Mitsubishi, I belatedly contacted our state Trade Office. They immediately put us in contact with the U.S. Commercial Services office in Dubai. They made space for me in their schedule on extremely short notice, and we met shortly thereafter. It didn’t take a genius to see that we would have been in a much better position if we had contacted them before embarking on this project. Then we would have known to:
1) Enlist the U.S. Commercial Services to find a partner that was already vetted
2) Discuss the structure of the final contract with Commercial Services before we even submitted our bid
3) Get in touch with the Export-Import Bank of the U.S. They could have given us some guidelines for the terms of our bid, which would have clarified things for everyone. One of the problems, in retrospect, was that our customer was actually a subcontractor, and our contract required them to pay us even if they never got paid by their customer. If we’d known that the contract should be written differently, we might have been able to give the subcontractor a little leeway and still get paid ourselves.
4) Buy Export Credit Insurance through the Export-Import Bank. We tried to do this after the fact, but it wasn’t possible. The Ex-Im Bank needed the historical and current financials of our customer before it could provide us with insurance, but those are not easily released in Dubai. In the end, we weren’t able to get them.
For all of the griping about government, our experience with our state Trade Office, U.S. Commercial Services and the Export-Import Bank of the U.S. could not have been better. They gave our small company prompt, professional and complete attention and helped us be much better prepared for future endeavors.
The experience in Dubai ultimately turned out to be expensive, but very educational. We spent a lot of time and money delivering and installing a small percentage of the racks before we figured out that it wasn’t going to be worth our while. And although we never got paid, it still could have been much worse.
Next time, I’ll know who to call. Before I get on the plane.
HANS STEEGE | Columnist | CEO, Dero Bike Racks
Hans Steege is a co-owner and the CEO of Dero, a Minneapolis-based business that builds bicycle-friendly communities worldwide. Before landing at Dero, Hans worked as an engineer in the machine design and product development industries.