What’s interco debt recovery?

Print anything with Printful



Business-to-business debt recovery involves collecting overdue payments between two companies. Third-party collection companies are hired on a contingent fee basis to manage the process, which includes initial communications, offers to settle, and locating debtors. Recovery depends on the creditworthiness of the debtor and their desire to stay in business. Successful recovery can be easier from companies with valuable reputations and multiple business relationships.

Business-to-business debt recovery is the collection of overdue receivables owed by one business to another. A third-party company that specializes in collecting bad debts from commercial customers is typically hired to manage the process. Also known as commercial debt collection, the distinguishing feature of this type of recovery is that the debt is between two companies, rather than a company and an individual customer.

Collection companies that handle intercompany debt recovery do so on a contingent fee basis. The transaction is usually structured so that the company gets 15-25% of the amount the company manages to recover. This percentage may seem exorbitant, but the time and effort required to recover bad debt is substantial. Many companies prefer to pay an outside agent to handle the process rather than spending valuable time away from core business activities.

The tactics employed by commercial debt collectors vary by jurisdiction. Debt collection is generally regulated to protect individual consumers, but some of the same laws apply equally to commercial debtors. Intercompany debt recovery typically includes initial communications and follow-ups, offers to settle less than the amount owed, research to locate assets that may be seized, obtaining a court judgment, reporting from credit bureaus, and locating debtors that may have skipped the area to avoid debt.

Business debt collection can seem very similar to consumer debt collection, but there are some key differences. The approach is a factor in intercompany debt recovery. Depending on how a business is legally organized, owners are likely to be protected from individual liability for business debt. This means that debt collection is only effective if the owners have a business they don’t want to leave. A company with outstanding debts can simply close its doors or file for bankruptcy, and the owner can start another company doing the same thing and free of old debts.

It can be particularly difficult to recover debts from companies with nothing to lose, but it can be easier to recover debts from companies with valuable reputations, roots in the community in which they operate, and multiple business relationships. Successful inter-business debt recovery depends on the creditworthiness of the debtor and the debtor’s desire to stay in business. Many companies rely on suppliers’ credit terms to manage inventory and cash flow. Often, the commercial debt collector is not legally prevented from contacting the company’s other suppliers, as opposed to a business-to-consumer collection, and making it known that the company is not paying its bills. If the company has many creditors, they may band together and force the company into involuntary reorganization or bankruptcy.

Asset Smart.




Protect your devices with Threat Protection by NordVPN


Skip to content