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Three keys to success in the sale of bad debts: How to convert non-performing receivables into innovation capital

Companies need to invest continuously in order to hold their own against the competition. Here, unpaid receivables can quickly become a problem. They can significantly impact liquidity and earnings and lead to high expenses for accounts receivable management. But expanding the core business should not suffer from bad debts. If the capital required for the next innovation step is scarce, I recommend selling non-performing receivables. This can be a worthwhile alternative as long as you keep a few success factors in mind.

An overdue order from the online store, the ignored mobile or electricity bill or high costs for car rental – there are defaulting customers in almost any industry who pose a challenge to companies every day. Yet, bad debt losses can be reduced through preventative risk and effective receivables management, for example. Nevertheless, I often see this problem arise with a wide range of customers, regardless of income, family status or age. Even with great investment in risk assessment, bad debt losses cannot be completely eliminated. In this case, selling the non-performing receivables can be a suitable option. By entrusting debt purchase to expert hands, you can increase your liquidity and also reduce internal workload. When it comes to drawing innovation capital from the process, I consider the following three points to be key:

1. Determine the right time

In order to bring the costs and benefits of accounts receivable management back into balance, companies should decide at what point it no longer pays off to use internal resources and whether an alternative, such as selling its receivables, could make economic sense. A one-off sale of receivables could, for example, be a good option for a portfolio of receivables that has accumulated over the years. An even more sustainable solution is the ongoing sale of receivables. Depending on the expectations of the company, this can take place from the second reminder or after several months of conducting its own collection. Companies should seek in-depth advice and find a tailored purchase offer.

2. Demand transparency and recognise sustainable offers

What is the value of a receivables portfolio? There are no rules of thumb here, because there is no simple answer to this question. Aspects such as the underlying transaction, from which the receivables result, the sales channels, the credit rating, the receivable amounts, the age of the receivables and the credit rating of the customer must be included in the assessment, as must the previous collection measures. This requires both an open dialog between the provider and the potential buyer and extensive experience of the buyer in the purchase of large B2C portfolios. Especially with the ongoing sale of receivables, companies need to know whether the business partner has correctly identified and assessed the relevant influencing factors. Only then can companies ensure that an offer for the ongoing purchase of their receivables is a sustainable solution.

3. Secure reliable collection – including globally

What’s clear is that the customer relationship is of fundamental importance in any company. This is the case even if a customer does not pay. Customers are often only temporarily in a difficult financial situation. Depending on the scale of the total debt of a customer, such a phase may last many years. Generally, it is important to seek a working solution together in order to settle the debts. In any case, only legal collection measures must be used. Accordingly, the business partner should have the necessary experience and have good instinct in dealing with all kinds of customers, as well as observe respectful conduct at all times.

Since many companies offer their products or services in more than one country, the local collection competence is another important selection criterion for the business partner. This not only relates to linguistic and cultural competences. Expertise regarding the legal collection processes is also critical, since they can vary significantly from country to country.

From my discussions with companies, I know that the concept of “outsourcing” the customer relationship can often be a considerable obstacle to the sale of receivables at first. Nevertheless, I am also convinced that any serious business partner will discuss any possible concerns and needs of the company. There are multiple possibilities here, from scaling collection fees, the retransfer of individual receivables where there are specific image risks to the possibilities of recovering customers once the debt has been recovered. So it always pays off to have a personal discussion.

Many factors are key to success

The right time for a one-off or ongoing sale, the transparency of the business partner and respectful collection – the success factors outlined here are only three of many that companies should keep in mind when considering the sales of bad debt. There are also a few other factors for the successful sale of receivables, from efficient connection and subsequent processes, ensuring compliance (such as data protection and VAT) to fundamental considerations in connection with the purchase and assignment agreement.

With the right partner, B2C companies are able to offer the most popular payment methods in some countries, such as payment on account or payment by direct debit. This increases sales without any negative effects such as persistently high expenses in accounts receivable management and high capital commitment. And as I often see in regular contact with customers, companies can ultimately use the capital more efficiently – for the next innovation step or to expand their core business. After all, this is precisely the goal of the sale of receivables.

How we support you by purchasing receivables

We first take a close look at your case, analyze your portfolio and submit an offer. Should we enter into a contract, we promptly pay the agreed purchase price. If you choose the ongoing model, we send you the purchase price payments on a continuous basis, keeping you liquid at all times. Once you have sent us your portfolio, we handle collection. In the meantime, you can sit back and think about how you wish to utilize your recovered liquidity as innovation capital.


Would you like more information on how to increase your liquidity? You can find more details about the topic here. Or go ahead and take the first step to receive your concrete offer.

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