B2B Collection Agency: How They Actually Work
How B2B Collection Agencies Work: The €4.2 Trillion Problem Hidden in Plain Sight
The Number That Should Keep CFOs Awake
According to the European Commission’s reporting on the Late Payment Directive, European businesses collectively carry approximately €4.2 trillion in outstanding trade receivables at any given time. Not all of that is overdue. But a significant percentage — estimated at 8-12% — sits past its payment terms, eroding in value every day.
Now consider the cost of doing nothing. A €100,000 invoice at 90 days past due is worth approximately €74,000 in expected recovery value. At 12 months, it’s worth €25,000-€30,000. The decline isn’t gradual — it’s a curve that accelerates after 90 days as the debtor’s financial position shifts, key contacts leave, and the obligation migrates from "active payable" to "historical dispute."
Your internal accounts receivable team recovers a fraction of what a B2B collection agency recovers — not because they’re less competent, but because they lack the tools. The signal authority. The legal mechanisms. The local presence. The debtor psychology expertise. The ability to escalate credibly.
Understanding how B2B collection agencies actually work — the mechanics, not the marketing — helps you decide when to use one, which one to choose, and what to expect.
Phase 1: Assessment (Days 1-5)
A competent B2B collection agency doesn’t start by calling the debtor. It starts by investigating them.
Credit assessment. The agency checks the debtor’s current financial status through local credit bureaus, commercial registers, and insolvency databases. Is the company still operating? Has it entered restructuring? Are there other judgments or liens against it? This takes 1-3 days and determines whether collection is worth pursuing at all.
Claim verification. The agency reviews your documentation: contract, invoices, proof of delivery, prior correspondence. They’re assessing two things — the legal strength of the claim and the documentation quality. A claim with a signed contract, confirmed delivery, and clear payment terms is straightforward. A claim based on an oral agreement with no delivery documentation is problematic.
Strategy selection. Based on the assessment, the agency selects the approach: which jurisdiction’s mechanisms to use, whether to lead with a phone call or a formal demand, how aggressive to be in the initial contact, and what escalation path to prepare.
This assessment phase is invisible to most creditors — they see the first demand letter and assume that’s where the work began. In practice, the assessment determines whether the demand letter is the right tool, or whether a different approach would be more effective.
Phase 2: Amicable Collection (Days 5-60)
First contact. Typically a phone call from a native-speaking collector in the debtor’s country. The purpose isn’t to threaten — it’s to establish communication, understand the debtor’s position, and create a timeline for resolution. Many commercial debts resolve at this stage simply because the debtor has been avoiding a faceless creditor and now has a person to deal with.
Formal demand. A written demand through the locally appropriate channel — registered letter, burofax, raccomandata, depending on the jurisdiction. The demand references the specific debt, the contractual terms, and the legal consequences of continued non-payment. This document serves dual purposes: it’s a collection tool and a prerequisite for legal proceedings if escalation becomes necessary.
Negotiation. If the debtor acknowledges the debt but claims inability to pay in full, the agency negotiates a structured resolution. Payment plans, partial settlements, instalment agreements. The negotiation skill isn’t just getting the debtor to agree — it’s structuring the agreement so the debtor actually follows through. A payment plan that ignores the debtor’s cash flow reality will be broken. One that accounts for it will be honoured.
Success rates. Amicable collection resolves 50-65% of commercial debts when initiated within 90 days of the due date. The rate drops to 30-40% for debts 6-12 months old, and below 20% for debts over 12 months.
Phase 3: Pre-Litigation Escalation (Days 60-120)
If the debtor doesn’t respond to amicable efforts, or makes commitments they don’t keep, the agency escalates.
Formal legal demand. A demand letter from a local attorney, referencing the specific legal mechanisms available for enforcement. This is a stronger signal than the agency’s own demand — the debtor now knows a lawyer is involved and litigation is operationally prepared.
Payment order procedures. Where available, the agency files for an administrative or judicial payment order: Mahnverfahren in Germany, injunção in Portugal, decreto ingiuntivo in Italy, proceso monitorio in Spain. These mechanisms produce enforceable titles without full court proceedings, typically in 30-60 days, at a fraction of litigation costs.
Credit bureau reporting. In jurisdictions where commercial credit reporting is available, the agency can report the delinquency. For the debtor, a negative credit report affects their ability to obtain trade credit, financing, and insurance. This creates pressure independent of any legal action.
Phase 4: Litigation (When Justified)
Litigation is the agency’s last resort — not because they’re reluctant, but because it’s expensive and slow relative to the earlier phases. The decision to litigate follows a strict economic calculation.
The threshold: Is the expected recovery (claim amount × probability of success) minus legal costs greater than the best amicable offer currently available? If yes, litigate. If no, settle.
Cost variables: Court filing fees (€100-€10,000+ depending on jurisdiction and claim size), attorney fees (€2,000-€20,000+ depending on complexity), expert witness costs if applicable, and enforcement costs post-judgment.
The agency’s role: Coordinating with local counsel, preparing documentation for court, managing the litigation timeline, and keeping you informed. The agency doesn’t replace the lawyer — it manages the process and ensures the litigation strategy serves your commercial interests.
What to Expect: Realistic Outcomes
An honest B2B collection agency will tell you what to expect before they begin. Here’s what the data shows across jurisdictions.
For debts under 60 days old with clear documentation: 85-94% recovery rate, 30-45 day average resolution.
For debts 60-180 days old: 58-74% recovery rate, 60-120 day average resolution.
For debts over 12 months old: 25-35% recovery rate, 120+ day average resolution, with significant variance.
These are averages. Individual cases vary based on the debtor’s solvency, the documentation quality, the jurisdiction, and the claim amount. But the pattern is consistent: time is the primary variable.
The Decision Point
You don’t need a B2B collection agency for every unpaid invoice. You need one when your internal process has been exhausted (typically 30-60 days of reminders without result), when the debtor is in a different jurisdiction than you, when the amount justifies professional involvement (typically €5,000+), or when you need the credibility signal that professional collection provides.
The cost of engaging too early is modest (you pay a contingency fee on money you might have collected yourself). The cost of engaging too late is substantial (reduced recovery probability on every day of delay).
If in doubt, engage earlier. The math always favours speed.
