Debt Recovery Collection Services: What You Need to Know
Debt Recovery Collection Services: You're Not Collecting Debt — You're Converting Dead Assets
The phrase “debt recovery” frames the problem backwards. It implies something was lost and needs to be found. Like searching for a misplaced wallet.
Here's the reframe: an unpaid invoice isn't a lost item. It's a frozen asset. It appears on your balance sheet as accounts receivable. It has nominal value. But it generates zero cash flow, and its real value decreases every month it sits there. Debt recovery collection services don't recover something lost — they convert a declining asset into liquid capital before the decline becomes terminal.
When you think of it this way, the decision framework changes completely. You're not deciding whether to “chase money.” You're deciding whether to let an asset depreciate or convert it while it still has value.
The Asset Depreciation Curve
Every receivable follows the same decay pattern. At 30 days past due, the asset retains roughly 94% of its face value. At 90 days, approximately 74%. At 6 months, about 58%. At one year, between 25% and 30%.
The depreciation isn't abstract. It reflects concrete probabilities: the debtor's financial position may deteriorate, key contacts leave, documentation becomes harder to locate, and the debtor psychologically recategorises the obligation from “must pay” to “might pay” to “probably won't pay.”
Professional debt recovery services exist to interrupt this curve. The earlier they engage, the higher on the curve they catch the asset.
What Debt Recovery Services Actually Provide
Behind the industry jargon, debt recovery collection services deliver four core functions:
Signal amplification. When your internal team sends a reminder, the debtor hears “they'd like to be paid.” When a professional recovery service sends a formal demand, the debtor hears “they're willing to invest in getting paid, which means they're willing to escalate.” The content of the message may be similar. The signal is entirely different.
This signal effect explains why professional services recover debts that internal teams couldn't. It's not that external collectors are more persistent or more threatening — it's that their involvement changes the debtor's calculation about the creditor's seriousness.
Intelligence gathering. Before pursuing a debt, a competent recovery service investigates the debtor. Is the company still operating? Has it entered insolvency proceedings? Are there other creditors with competing claims? What assets are available for enforcement?
This intelligence prevents the two most expensive mistakes in debt recovery: pursuing an insolvent debtor (wasting resources on an uncollectable claim) and under-pursuing a solvent one (leaving money on the table because you assumed the situation was worse than it was).
Procedural expertise. Each jurisdiction has specific legal mechanisms for debt recovery — payment order procedures, enforcement processes, pre-litigation demand requirements. A specialised service knows which mechanism to use, when to use it, and how to prepare the documentation that each mechanism requires.
In Germany, that means the Mahnverfahren. In France, the injonction de payer or référé provision. In Spain, the proceso monitorio. In the UK, the statutory demand or County Court claim. Each mechanism has its own requirements, timelines, and costs. Using the wrong one — or missing a procedural step — can delay recovery by months.
Negotiated resolution. Most commercial debts resolve through negotiation, not litigation. A professional service can negotiate payment plans, partial settlements, and structured arrangements that balance recovery maximisation against collection costs and relationship preservation.
The negotiation expertise matters because many debtors will agree to pay — they just need a structured framework. “Pay €250,000 immediately” often fails where “pay €50,000 now and €50,000 monthly for four months” succeeds. The total recovery is the same. The debtor's cash flow capacity determines which structure works.
Amicable vs. Legal Recovery
Debt recovery operates on two tracks:
Amicable recovery involves contact, demand, negotiation, and resolution without court involvement. This is always the first track — it's faster, cheaper, and preserves the commercial relationship. Amicable recovery resolves 50-65% of commercial debts when initiated within 90 days of the due date.
The cost of amicable recovery is typically a contingency fee: 10-30% of what's recovered, depending on the jurisdiction, the claim's age, and the amount. No recovery, no fee. The economics are straightforward — even at a 30% contingency, you're netting 70% of money you might otherwise write off entirely.
Legal recovery involves court proceedings — payment orders, enforcement actions, or full litigation. Legal recovery is the escalation path when amicable efforts fail, and it carries additional costs: court fees, attorney fees, and longer timelines.
The decision to escalate should be economic, not emotional. The calculation: is the expected recovery (amount × probability of success) minus the legal costs greater than the best amicable offer on the table? If yes, escalate. If no, settle.
A good recovery service helps you make this calculation with accurate data about success probabilities in the relevant jurisdiction, realistic cost estimates, and an honest assessment of the debtor's ability to pay.
When to Engage a Recovery Service
The optimal timing is 30-60 days past the due date — after your internal reminders have been ignored but before the debt enters serious decay.
Too early (before the due date or immediately after): Most internal credit management processes should handle the first reminder cycle. Engaging a recovery service before you've attempted internal collection creates unnecessary cost.
On time (30-60 days past due): The sweet spot. The debtor has demonstrated non-payment, your internal process has been exhausted, and the debt is still high on the recovery curve.
Too late (6+ months past due): Still worth pursuing, but recovery probabilities have dropped significantly. The recovery service can still be effective, but expectations should be calibrated. A 40-50% recovery on a 12-month-old debt is a good outcome, not a failure.
Way too late (2+ years past due): Recovery is possible but improbable for most commercial debts. Statute of limitations concerns become relevant. The service may recommend writing off the receivable or pursuing a deeply discounted settlement.
Choosing the Right Service
The selection criteria are straightforward:
Contingency-based pricing for amicable recovery. If the service wants upfront fees before any collection activity, question why. Legitimate services working on contingency are incentivised to recover quickly and efficiently.
Jurisdiction-specific capability. For international debts, the service must have local agents in the debtor's country. “Global coverage” means nothing without local execution.
Clear escalation framework. The service should explain exactly what happens at each stage — initial contact, formal demand, pre-litigation escalation, and litigation recommendation — with estimated timelines and costs.
Transparent reporting. You should know the status of every claim, every action taken, and every debtor response. Monthly reporting is the minimum standard.
The Conversion Mindset
Debt recovery collection services exist to convert declining assets into cash. The longer you wait, the less there is to convert. The question isn't whether professional recovery services are worth the fee — it's whether the fee is worth more or less than the continued depreciation of doing nothing.
For most commercial debts over €5,000, the math is clear. A 15-25% contingency fee on a successful recovery is always cheaper than a 100% write-off.
Convert the asset while it still has value. That's the entire strategy.
