Commercial Debt Collection: Recover What Others Write Off
Commercial Debt Collection: The Difference Between Chasing Payment and Managing Receivables
Most companies think about commercial debt collection the way they think about plumbing: something you call a professional for when things have already gone wrong. The invoice is 90 days overdue, the debtor isn't responding, and suddenly it's a crisis.
The frame shift: commercial debt collection is receivables management — not damage control. The companies that recover the most money aren't the ones with the best lawyers or the most aggressive collectors. They're the ones who built the collection mechanism into their commercial process from the beginning.
By the time you're Googling “commercial debt collection agency,” you've already lost time. But you haven't lost the money — not yet. That's the window worth understanding.
The Decay Curve
Commercial debt has a half-life. The data is consistent across jurisdictions:
At 30 days past due, approximately 94% of B2B invoices are recoverable. At 90 days, that drops to roughly 74%. At 180 days, it's about 58%. At 12 months, you're looking at 25-30%. These aren't arbitrary numbers — they reflect the compounding probability that the debtor's financial position deteriorates, that key personnel change, that documentation is lost, and that the debtor develops a psychological distance from the obligation.
The single most important variable in commercial debt recovery is time. Not the amount owed, not the debtor's jurisdiction, not the complexity of the contract. Time.
What a Commercial Collection Agency Actually Does
Strip away the jargon and a commercial debt collection agency provides three things:
Professional escalation without relationship damage. When your own accounts receivable team has sent three reminders and made five phone calls without result, the dynamic is stuck. Introducing a third party changes the signal. The debtor now understands that the creditor has invested resources in recovery, which implies willingness to escalate further. A professional agency can deliver this signal while maintaining diplomatic language that preserves the commercial relationship.
This matters more than most creditors realise. In B2B commerce, today's debtor is often tomorrow's customer. The agency that recovers the money while keeping the relationship viable is worth more than the one that recovers slightly more money but burns the bridge.
Local expertise in the debtor's jurisdiction. A commercial agency based in the debtor's country understands the local legal mechanisms, communicates in the local language, and can escalate to local courts if necessary. For international debts, this local capability is the primary differentiator between agencies that recover and agencies that correspond.
Information asymmetry reduction. A good agency investigates the debtor before pursuing the debt. Is the company solvent? Are there other creditors with competing claims? Has the debtor filed for restructuring or insolvency protection? Are there assets to pursue if litigation becomes necessary?
This intelligence shapes the strategy. Pursuing a solvent debtor who's simply slow-paying requires a different approach than pursuing a debtor who's 60 days from insolvency. The wrong strategy wastes time and money.
The Fee Structure (Demystified)
Commercial collection agencies typically work on one of three models:
Contingency (no recovery, no fee). The agency charges a percentage of what they recover — typically 10-30% depending on the claim's age, amount, and jurisdiction. This is the standard model for amicable collection and aligns the agency's incentives with yours. If they don't collect, you pay nothing.
Fixed fee per case. Some agencies charge a flat fee for initial demand letters and a set period of collection activity. This model makes sense for high-volume creditors with many small claims. Typical range: €50-250 per case for the initial phase.
Legal fees (separate from collection fees). If the case escalates to litigation, court costs and attorney fees are separate from the collection contingency. These are typically disclosed and approved before filing. In many European jurisdictions, the losing party bears court costs, but attorney fees may or may not be recoverable depending on the jurisdiction and contract terms.
The critical question to ask any agency: “What happens if amicable collection fails?” The answer reveals the real cost structure. An agency that earns only on contingency has every incentive to escalate when appropriate and recommend withdrawal when the case is uneconomic. An agency that charges upfront fees may have less incentive to assess viability honestly.
Choosing an Agency: The Five-Question Filter
Do you have local presence in the debtor's country? Not “partner networks” — actual agents who speak the language, know the courts, and can escalate locally. The difference in recovery rates between direct and outsourced local agents is measurable.
What's your average recovery timeline for claims similar to mine? An agency that can't answer this with specific numbers (e.g., “42-day average for amicable resolution of German commercial claims under €100K”) either hasn't tracked their performance or doesn't have enough volume to be meaningful.
What happens when amicable collection fails? The answer should describe a clear escalation path — legal demand, payment order procedure (where available), litigation — with estimated costs and timelines for each step.
Will I receive regular status updates? Monthly reporting should be the minimum. For claims in active negotiation, bi-weekly updates are reasonable.
What's your contingency rate, and are there any upfront costs? For amicable collection, a no-recovery-no-fee arrangement should be standard. Any upfront charges should be clearly explained and modest.
When Not to Use a Collection Agency
Not every unpaid invoice needs professional collection. The threshold depends on your business:
For invoices under €1,000: The economics often don't justify agency fees. Handle internally with a structured escalation process (reminder → formal demand → credit hold → credit bureau report).
For disputed invoices: If the debtor has a legitimate dispute about quality, delivery, or contractual terms, a collection agency can't resolve the underlying issue. Address the dispute first, then collect the agreed amount.
For insolvent debtors: If the debtor has entered formal insolvency proceedings, collection agencies can't bypass the insolvency process. You'll need to file a proof of claim with the insolvency administrator and wait for distribution. An agency can help identify early insolvency signals so you can act before proceedings begin.
The Strategic Perspective
The CFOs who manage receivables well don't wait for debts to become delinquent before establishing collection relationships. They have agency partnerships in place, they escalate within 60 days, and they treat every late payment as a signal — either about the debtor's financial health or about their own credit management process.
Commercial debt collection isn't an admission of failure. It's the final step in a complete commercial process. The companies that collect the most are the ones that built the collection mechanism before they needed it.
