Commercial collection agencies exist because internal credit management teams are structurally disadvantaged at recovering non-performing receivables. This is not a criticism of internal teams — it is a recognition that managing performing accounts and enforcing non-performing ones are different disciplines requiring different capabilities, different incentive structures, and different debtor relationships.

The CFO's decision is not whether professional recovery is effective — the data on that point is unambiguous. The decision is when to deploy it and how to integrate it with internal credit management.

The decision framework

The optimal point for engaging a commercial collection agency is determined by three variables: time since default, debtor responsiveness, and claim complexity.

Time since default. Recovery probability declines by 3-4 percentage points per month of aging. The inflection point — where internal follow-up becomes materially less effective than professional engagement — is approximately 60 days past due. Before 60 days, internal follow-up is appropriate and cost-effective. After 60 days, every additional month of internal management reduces the eventual recovery by a measurable amount.

Debtor responsiveness. A debtor who is communicating — acknowledging the debt, providing payment timelines, and making partial payments — may resolve through internal management even beyond 60 days. A debtor who has stopped communicating, is providing inconsistent explanations, or is making promises without performance should be escalated immediately. Silence from a debtor is not neutral — it is a signal that the debtor has deprioritised your claim.

Claim complexity. Claims involving cross-border elements, disputed terms, or complex corporate structures benefit from professional engagement earlier rather than later. An internal credit team managing a straightforward domestic receivable has different capabilities than the same team managing a claim against a foreign subsidiary with assets in multiple jurisdictions.

What professional engagement actually provides

Professional collection agencies provide four capabilities that internal teams typically lack:

Enforcement credibility. When a professional agency contacts a debtor, the debtor's calculation changes. The debtor knows that the agency has the capability and willingness to escalate to legal enforcement. This credibility creates a compliance pressure that internal follow-up — however persistent — cannot replicate.

Jurisdictional expertise. International claims require knowledge of local enforcement instruments, local counsel relationships, and local court procedures. A professional agency maintains this expertise across multiple jurisdictions simultaneously.

Separation of functions. Professional recovery separates the enforcement function from the commercial relationship function. The creditor's sales team maintains the relationship. The agency creates the enforcement pressure. The debtor understands that payment resolves the enforcement engagement and normalises the commercial relationship.

Portfolio intelligence. Professional agencies process thousands of claims across multiple jurisdictions and industries. This portfolio intelligence informs strategy: which debtors in which jurisdictions respond to which approaches, and what resolution timelines are realistic for specific claim types.

The cost structure

Contingency-based commercial collection has zero downside cost for the creditor during the amicable phase. The agency earns only if recovery is achieved. The typical contingency range — 5-25% of the recovered amount — is a fraction of the recovery that would otherwise be written off.

The economic comparison is not "recovery minus contingency fee" versus "full recovery." It is "recovery minus contingency fee" versus "whatever the internal team would have recovered, minus the internal team's time and opportunity cost." On this comparison, professional engagement produces higher net recovery in the substantial majority of cases.

If you're managing a portfolio of non-performing receivables and trying to determine the right engagement point, the framework above provides a structured approach. Brief our team with your portfolio data for a no-obligation assessment and timing recommendation.