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Debt Collection

Businesses More Likely to use Debt Collections Agencies for International Debts

By CreditMan Monday, June 14, 2010

The latest "Global Collections Review" survey undertaken by leading
credit management and collections specialist Atradius Collections, assessed the current commercial debt collection trends and practices with more than 1,700 companies in nine European countries. This second study, builds on the findings from the initial research released in January 2010, focusing on the use of debt collections services and the number of days that international and domestic debts are overdue, as well as the nature of the criteria used to select an external agency and factors that may discourage companies from
outsourcing their outstanding debts.

One of the key findings from the latest Global Collections Review shows
that external debt collections agencies are used to collect international debts by more than half (53%) of companies using outsourced debt collection services to help improve cash flow and increase liquidity.

Of all the companies surveyed, more than half of those in the Netherlands
and Sweden are using external debt collections agencies, which is well in
excess of the European average of around one-third. Interestingly, these two countries also returned figures of less than half of the European average on domestic receivables more than 90 days overdue, with similar results for
international debts.

The effectiveness of external debt collections agencies and their
abilities to deliver results topped the list of why European businesses
choose to take on such an external agency. When asked to rank a series of
eight criteria, 'success rate' was regarded as most important with 'price'
rated as only of secondary importance, followed by 'reputation', 'the ability
to maintain a positive relationship' and 'local knowledge'. In addition to
these general trends, some interesting preferences can be spotted in some
countries. Businesses in Italy, ranked 'reputation' as more important than 'success rate', while businesses in Germany rated an agency's 'ability to maintain a positive relationship with the debtor' the highest of any country surveyed.

Raymond van der Loos, Managing Director of Atradius Collections
explained: "For many businesses the recession and the need for liquidity were Key factors in deciding to use an external debt collections agency, which was reflected in the findings from our original study six months ago. Our new Review provides some clear evidence that this development is continuing and as a result of the successes that have been delivered by external debt collections agencies, it is now the dominant method in some countries."

He added: "This new study also identifies some interesting attitudinal, cultural and geographic differences, which help us ensure we deliver a high quality local service in a global market. Also, the question of maintaining positive relationships with debtors, raised by businesses in Germany in particular, has never been an issue for us as in our own regular customer satisfaction surveys, more than 90% of customers say that we maintain positive relationships."

Among the five reasons for not outsourcing debt collections, 'lack of
trust in the success of the outsourcing party' came low on the list at fourth with 'cost' ranked only one place higher. This indicates that the debt collections industry is well regarded even by businesses that don't use outsourced debt collections and that 'cost' is a relatively minor factor, whether or not a company chooses to use an external debt collections agency.

The "Global Collections Review" survey was conducted among 1758 businesses across 9 countries: Belgium, Denmark, France, Germany, Great Britain, Italy, the Netherlands, Spain and Sweden.