Debt Collection: Essential Infrastructure for Credit Markets
Open-account B2B trade — shipping goods before receiving payment — represents approximately 80% of global commercial transactions. This system functions because non-payment has consequences. Debt collection provides those consequences.
The Trust Mechanism
When a German manufacturer ships EUR 500,000 in components to an Italian buyer on 60-day terms, no cash changes hands. No bank guarantee. No escrow. Just an invoice and an expectation. This trust is sustained by a functioning enforcement system: demand, court proceedings, enforcement, insolvency. Remove any link in this chain and open-account trading becomes unviable.
The Economic Function
Without effective collection, creditors would require cash-in-advance or letters of credit for every transaction — instruments that cost 1-5% of transaction value and add weeks to the commercial cycle. Professional debt collection makes trade credit affordable by limiting default losses to manageable levels.
The Information Function
Collection activity generates credit intelligence that feeds databases like Dun & Bradstreet, Creditsafe, and Coface. This information allows creditors to assess risk before extending terms — creating a feedback loop that improves credit allocation across the entire economy.
The Deterrence Function
The existence of professional collection and enforcement deters non-payment before it occurs. Companies that know their creditors will pursue unpaid invoices through legal channels are more likely to prioritise payment.