Common sense in Japan is often beyond imagination for the rest of the world, and the same applies to credit management. A major difference is the proliferation of promissory notes in trade settlements.
In Japan, settlements by promissory notes account for more than half of trade settlements but have been decreasing over the recent years.
That is because the bill transactions are kept at a distance for various reasons. A typical reason is the stamp tax to put on the bill. If you process accounts payable by transfer instead of bills, you only need the transfer fee.
Regardless, the biggest feature of the settlement by promissory note is the dishonoured note system. In Japan, if the notes are not settled on time, it instigates a fair amount of fear and loss of credibility. If this occurs twice within six months, the bank transactions will be suspended, which technically means the bankruptcy in Japan. For example, it is not uncommon to trigger bankruptcy, even for a single dishonoured note causing credit insecurity.
However, in abroad, promissory notes are hardly used. Besides, most countries do not have a dishonouring system for notes and checks. Instead, the due date cash transactions called open accounts is the mainstream. In other words, it is a settlement condition by issuing an invoice for payment and having it paid by the due date.
This open account has no penalty for overdue. Of course, the contract between the parties will contain provisions for delayed interest rates and damages for delayed payments.
However, with this rule applied, there should be few companies that charge customers for interest rates on delinquencies for several days. There is no big difference between paying on time and paying late. Thus days-beyond-terms is a common scenario in companies overseas.
In overseas, unlike Japanese companies, many companies do not closely monitor due dates. Of course, not all companies do. Accountants of foreign companies can delay the payments without being sued, and are often admired for these skills.
