Business debt collection: what DSO, aging and recovery rate show

A target picture makes business debt collection measurable. The central KPIs are DSO, the share of overdue items by age bracket, the average days in default, the success rate per dunning level and the write-off rate. Without these figures, any improvement remains an assertion.

Clean separation matters: cases held up by a complaint do not belong in the same statistic as genuine payment problems. Otherwise the steering signal becomes blurred. For business customers, a credit check before granting new payment terms is worth the effort. That keeps the case understandable for colleagues with no prior knowledge of it.

Clear responsibilities prevent friction between sales, accounting and legal. Sales knows the customer relationship, accounts receivable knows the payment status, legal knows enforcement. The process has to define who decides when and who escalates.

An escalation matrix based on amount and age of the receivable reduces one-off decisions. Small amounts run automatically, large amounts are reviewed individually. Framework agreements should state how partial performance and interim invoices are handled. That brings the starting point back into view: what DSO, aging and recovery rate show.

The system landscape determines the effort. Accounting software, ERP and payment processing should be connected so that incoming payments are allocated automatically and the remaining balance is always shown correctly.

An export in a clearly defined format is essential as soon as cases are handed to a service provider. An interface or a structured CSV file is far superior to a manual collection of documents. Companies with a steady volume of receivables benefit from a fixed handover cycle rather than one-off ad hoc instructions. A short note in the system replaces any later reconstruction from memory.

Escalation rules should be written down: which stage applies from which day of default, from which amount an individual review takes place, and from when a case is automatically passed to collection or legal.

Four-eyes approval for write-offs and a documented sign-off for instalment plans belong here too. Both protect against silent receivable losses. In business-to-business trade, nine percentage points above the base rate plus the EUR 40 flat fee are the usual ancillary claims. The thematic core stays the same: what DSO, aging and recovery rate show.

The first 30 days are about transparency: structure open items by age, clean up master data, name the owners and document the current dunning deadlines. The goal is a reliable baseline, not a perfect system.

A realistic schedule beats an ambitious one. Three stages implemented properly are worth more than ten stages nobody follows day to day. The larger the volume, the more important standardised data formats and clearly defined service levels become. What counts is less the perfect solution than one that is actually applied day to day.