Accounts Receivable Collection Services: Convert Aging AR to Cash
Accounts Receivable Collection Services: Your Balance Sheet Says Revenue — Your Bank Account Says Otherwise
The Gap Between Accrual and Cash
Your financial statements show €2 million in accounts receivable. Your bank account shows €1.4 million in available cash. The €600,000 difference isn't theoretical — it's real money sitting in other companies' bank accounts, aging by the day, declining in recoverable value with every week that passes.
Accounts receivable collection services exist to close that gap. Not by improving your internal AR process (that's a different conversation), but by converting the receivables that your internal process has already failed to collect.
The distinction matters. By the time a receivable reaches a collection service, your reminders have been sent, your phone calls have been made, and your payment terms have been ignored. The debtor has decided — consciously or through inertia — that your invoice is not a priority. A collection service changes that decision.
When Internal AR Ends and Professional Collection Begins
The handoff point matters more than most CFOs realize.
30 days past due: Your internal process should handle this. Automated reminders, follow-up calls, statement reconciliation. Professional collection at this stage is premature.
60 days past due: The warning zone. If your internal team hasn't received a commitment to pay, the debtor is either unable or unwilling. Begin preparing for external escalation.
90 days past due: The optimal engagement point. Your internal process has been exhausted, but the receivable still retains approximately 74% of its face value. Professional collection at this stage produces the best cost-to-recovery ratio.
180+ days past due: Still recoverable, but recovery rates have dropped to 58% and the cost of collection (as a percentage) increases. Every additional month of delay narrows the margin between recovery and write-off.
What Collection Services Actually Do
They change the signal. Your accounts payable department sending reminders is background noise to a strategic non-payer. A professional collection agency sending a formal demand is a signal that the creditor has invested resources — and is prepared to invest more. This signal shift alone resolves 50-65% of claims.
They investigate before they pursue. Is the debtor still solvent? Are there insolvency proceedings? What assets are available for enforcement? This intelligence prevents chasing uncollectable claims and ensures viable claims get appropriate pressure.
They deploy jurisdiction-specific tools. Each country has legal mechanisms — payment orders, statutory demands, credit bureau reporting — that create consequences for non-payment. A competent service knows which mechanism to deploy, when, and at what cost.
They negotiate realistic resolutions. A debtor who can't pay €100,000 immediately may pay €25,000 monthly over four months. The collection service structures agreements the debtor can actually honour — because a broken payment plan wastes everyone's time.
The Economics
Contingency fees for commercial AR collection typically run 10-30%, depending on the claim's age, amount, and jurisdiction. No recovery, no fee.
The math: if your internal recovery rate for 90-day debts is 40%, you're recovering €40,000 on a €100,000 receivable. If a professional service recovers €75,000 at 20% contingency, your net is €60,000 — a €20,000 improvement over doing it yourself.
The companies that write off the most AR aren't the ones with bad products or bad customers. They're the ones that treat receivables as an accounting problem rather than an asset management problem.
Building the Handoff Into Your Process
The best AR management doesn't wait for crisis. It has predefined escalation triggers: Day 30 — automated reminder. Day 45 — phone call from AR team. Day 60 — formal demand with interest notice. Day 75 — final warning: agency referral. Day 90 — refer to professional collection.
Remove human judgment from the timing decision. Humans will always find reasons to wait longer. The data never supports waiting.
