If the decision is made to outsource international debt collection, there are some general questions that companies should ask themselves and their potential partners:
1. How much capacity do I have to manage collection agencies?
This question addresses whether a company wishes to involve a single or multiple debt collection partners for each country. The alternative is a central partner that ensures outstanding receivables are processed locally in the relevant countries. A central partner always has a competitive edge when it comes to the costs of selection, communication, and management. But it also increases dependency! It’s much harder to switch in this case than replacing a local partner.
2. Is my potential debt collection provider reputable?
There are bad apples in any industry and debt collection is generally a sensitive topic. That’s why the reputation of debt collection providers suffers particularly from the dubious schemes of some “outliers”. The local debt collection associations can be a good starting point – such as the BDIU (Germany), DIB (Denmark) and NVI (Netherlands) which ensure the credibility of their members.
3. How secure and simple are the processes?
This primarily concerns the security of data exchange. It goes without saying that all credible providers comply with national and European regulations on data handling. So, this question explores how fast and effectively data exchange can be implemented, as well as user-friendliness. Lots of interfaces, slow transfers or cumbersome uploads can result in considerable costs in the IT department or accounting. In this case, far more resources are needed than originally planned.
4. How to keep an overview of open receivables and successful recoveries?
Naturally, outsourcing means that companies hand over a significant part of their business operations. After all, around 20% of all receivables on average are not paid on time. Companies can only maintain an overview of the financial situation and successful recoveries when clear and consistent reporting is available. In the case of many partners, however, this level of consistency can only be secured with extensive coordination as well as both partners’ willingness to cooperate.
In my experience, exploring these questions thoroughly can prevent any (nasty) surprises during implementation and over the long-term collaboration with one or more debt collection providers.