Debt Collection of Corporate Receivables

Who, How, Why, Where and How Much

СъбиранеMy father used to say: „the sale is not finished, while the money is not in the bank”. A rather true statement. At the same time many companies in Bulgaria do not adhere to the fact that the debt collection of corporate receivables is an important and complex job. Just consider: how many Bulgarian companies have a “Collection Department”? All of them have a “Sales Department”, “Accounting Department”, “Logistic Department” …. what have you. It is a fact that only few companies have specialized departments or experts in debt collection of corporate receivables. With the present article we want to draw attention to this sometimes dangerous “inequality” and to suggest some ideas how it may be easily overcome.

The care for the debt collection of corporate receivables in every company is an important aspect for its existence. In Bulgaria we have a saying –  „It is better to have receivables than liabilities”. This statement may be true, but it is not complete when we are speaking about corporate finances. The problem comes from the fact that the former leads to the latter. According to a EU survey – The European Index for Payments of Intrum Justitia, Bulgarian companies write off receivables at double the average EU rate. Businesses in Europe lose annually the average 3.1% of their income, while the same figure for Bulgaria is some 7%. These are a substantial amount of money, which the Bulgarian companies may invest in new projects, which will lead to growth, development and job creation. According to the same index, Bulgaria is among the countries with the highest risk for payment of the obligations on time, and the businesses in the country are among the most vulnerable on the Continent, because of the custom to defer payments. The accumulation of deferred payments of a company can easily lead to the domino. At a given moment the company-debtor may not be in a position to honor its payments, thus creating difficulties for its contractors along the value chain also to honor their obligations. Above 2/3 of Bulgarian companies experience liquidity issues due to deferred payments from their clients. And 75% of their managers consider this to be a hindrance to their business. The problem is more acute with the SMEs, which have a limited access to financing and which often due to deferred payments to them, become indebted to their suppliers.

To the question „Do you have delayed payments of your receivables?” the answer is :

Графика … the blue color is for “Yes” from the Bulgarian survey.

The biggest problem stems from the fact that the companies themselves do not recognize the gravity and complexity of this issue. Many of them consider that when they forward the responsibility for collection to their accountants, sales employees and/or administration staff, the problem will be solved. Unfortunately they learn of their mistake eventually, but then it may be too late. This in turn lead to the domino effect. It is a fact that the older an receivable is, the harder is its collection. With the growing of age of a receivable amount, the nearer is the time for its write off as a loss.

This leads to the following question: Why do most companies lack a policy for the collection of their corporate receivables? The most common answers in Bulgaria are:

  • It is very expensive to have such a policy;
  • My secretary is doing a perfect job in collection without any policy for collection – we only have BGN 70.000 of late payments;
  • We do not have the capacity to hire a collection expert and so on.

We all know, that when a man wants, a man will think of an excuse for his every action or lack of such. Here is a topic for thought:

How much are these uncollected receivables worth?

If we consider what interest, late interest, penalties, write offs and bad reputation arise from late collection of our receivables, it will become evident that they are considerably more expensive than their collection itself. Collection practice shows that when a company acts in a timely manner (this means 30-40 days from the occurrence of the receivable), the collection of the receivables is not expensive at all and is considerably more effective. An easy example is that a late payment from us to our financing bank will bring us more late interest /we are not including penalties, losses or reputation/, than the amounts which are needed to pay to a collection expert for collecting the money.

An example: the standard price for collection of a new receivable /0-60 days/ from a specialized collection company is between 2% and 3% of the amount collected. A mirror deferral of the same amount on our overdraft to our bank will cost a minimum of 12%-13% late interest on the same amount. These are only the current losses. Sadly, as we discussed above, in addition to the current losses sometimes /7% of income on average for Bulgaria/ a total write off of the receivable is reached. The ‘saving” of these 2-3 percent, leads to a much bigger loss. And this is not only loss of money but of reputation too, which sometimes is more important than the money itself.

The Solution

It is absolutely viable to hire a collection expert in your company. This however may not be economically practical. Specialized periodic training, equipment and software will be needed. Access to specialized data will be required and the respective specialized control in place. In addition to this it is likely that in some periods of time, the company just doesn’t have any receivables. This will leave our collection colleague unoccupied from time to time … but not without a salary.

The outsourcing of the collection management process /BPO of this process/ is a rather more efficient solution. For about a decade in Bulgaria comprehensive solutions for debt collection may be found, with the use of a specialized collection company. The so called “collection companies” lived through their toddler years, in the Bulgarian case – their “naughty years”. Today they have experience, legal culture and communication culture with the debtors /not all debtors are “bad people”/. We may safely say that the services of the debt collection companies provide perfect results. Proof for this is their use by all banks, leasing companies and big corporates. During the last 4-5 years a secondary market for deferred payments came into existence in Bulgaria. All mobile operators, community service providers and large companies participate in it.

Here are some of the leading Bulgarian debt collection companies:

Coin Consult –

EOS Matrix –

Coface –

NeoCollect –


Frontex –клиенти/

What are the benefits for a company in using a specialized debt collection firm?

  • The company will not have to provide office space and work places, office equipment, cars, specialized software, access to data bases, communication;
  • The company will not have to pay for hiring collection experts and paying their salaries and insurance;
  • Payment is not made unless collection of the corporate receivables is achieved;
  • It is easy to budget the expenses for receivables’ collection;
  • Professional analysis of receivables is achieved;
  • Decreased amounts of receivables and improved liquidity;
  • While the debt collection company is collecting the receivables, the employees of the main company may focus on their core business;
  • A company policy to late payments comes into existence which starts to prevent deferrals;
  • Educational effect – for your clients as well as for your own employees.

How can you choose your corporate collection partner company?

  • Make a research on the currently active collection companies on the Bulgarian market and their reputation /internet is a perfect place for this/;
  • Study the references for the work of the collection companies. The existence of satisfied customers increases your chance for selection of a good collection partner, as well as your own future satisfaction with the job on collection of your corporate receivables;
  • Study their reputation. In this instance be wary of negative reputation which eventually may rub off your own company;
  • It is reasonable that the collection company, although with operation in Bulgaria, to have its Head Office in some more developed country. A branch network in several European countries is a good signal of their professionalism. In this way you will be sure that you are using services which are acceptable in more developed European countries;
  • Choose a few and meet with them. Ask about their terms and limitations. Some of the biggest collection companies are specialized in servicing only large financial clients with multimillion receivables;
  • Check whether they are listed as an „operator of personal data”, as the legal regulations require, because while working with them you will have to supply them with personal data of your debtors;
  • If you want to save time with the above research, you may call AVS Bulgaria directly – we adhere to all enumerated requirements above and are experts in debt collection for SMEs in Bulgaria. Send us your inquiry.


The conclusion is that the quicker a company makes the decision on the important question of debt collection of corporate receivables, the faster this company will be able to escape, or better yet never enter, the vicious circle of delayed receivables and liabilities.


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