How to Avoid Bad Debts When Selling to Spanish Companies

For every euro spent on preventing a bad debt, you save between four and eight euros in recovery costs, management time, and cash flow disruption. That ratio holds regardless of your industry or the size of your Spanish client base. The question isn't whether prevention is worth it — it's which preventive measures deliver the highest return for overseas creditors selling into Spain.

Before the Contract: Due Diligence That Matters

Spanish company credit checks. The Registro Mercantil (Spain's commercial registry) provides basic information about any registered Spanish company — incorporation date, directors, filed accounts. For deeper analysis, services like Informa D&B, Axesor, and CESCE offer credit reports on Spanish businesses that include payment behaviour scores, outstanding legal proceedings, and financial health indicators. A credit check costs between €20–€100 and takes minutes. It's the single highest-ROI step in bad debt prevention.

Trade references from other international suppliers. Ask your prospective Spanish client for references from other overseas suppliers they've worked with. A company that pays its domestic vendors promptly but delays international invoices will show a pattern. If the client refuses to provide references or offers only domestic ones, that tells you something too.

ASNEF and RAI registry checks. These Spanish debtor registries indicate whether a company has outstanding defaults. A listing on either registry is a strong signal that extending credit involves elevated risk. The absence of a listing doesn't guarantee reliability, but presence on these registries is a clear red flag.

During the Contract: Terms That Protect You

Payment terms in writing, in the contract, in Spanish. Spanish courts enforce written contractual payment terms. Verbal agreements about payment schedules are difficult to prove. Specify exact payment dates, late payment interest (reference Ley 15/2010 for statutory authority), and the consequences of non-payment. Have the contract reviewed by a Spanish commercial lawyer if the deal justifies the cost — for contracts above €50,000, it almost certainly does.

Retention of title clauses. For goods supplied to Spanish companies, a retention of title clause (reserva de dominio) can provide security. The goods remain your legal property until paid for. This is most effective when registered properly under Spanish law and when the goods are identifiable — less useful for raw materials that get mixed with other inputs, more useful for equipment or finished products.

Staged payments. For large contracts, milestone-based payment structures reduce exposure. A 30% advance, 30% on delivery, and 40% on acceptance means your maximum exposure at any point is 40% of the contract value, not 100%. Spanish businesses are accustomed to this structure in construction, engineering, and technology contracts.

Early Warning Signs

Payment delays that escalate gradually. A company that paid in 35 days, then 50, then 70, is showing a pattern that won't reverse itself. Requests to change payment terms mid-contract. New management or restructuring announcements. Delays in responding to routine commercial correspondence. Any of these, individually, might be innocent. Two or more in combination warrant a conversation with a collection professional before the situation deteriorates further.

FAQ

Is credit insurance worth it for Spanish clients?

For companies with significant and recurring Spanish receivables (€500,000+ annually), credit insurance through providers like Coface, Euler Hermes, or CESCE can be cost-effective. For smaller portfolios, the premium may exceed the expected loss. The calculation depends on your client concentration and risk tolerance.

My Spanish client has been reliable for years. Should I still do annual credit checks?

Yes. Business conditions change, and a company that was financially healthy two years ago may not be today. Annual credit checks on established clients are inexpensive insurance. The companies that cause the most painful bad debts are often long-standing clients whose deterioration went unnoticed.