What is debt collection?
Every third invoice in Germany is not paid on time – and many are never paid at all. For businesses, this means liquidity issues, administrative effort, and in the worst case, receivables that have to be written off entirely.
This is exactly where debt collection comes in. Debt collection refers to the professional recovery of outstanding receivables that a creditor has against a debtor. If customers fail to settle their invoices despite reminders, a specialised debt collection service can be engaged. These providers have the necessary legal expertise to recover outstanding amounts effectively and in compliance with the law.
What many people don’t realise: well-structured debt collection usually does not harm customer relationships. On the contrary, a professional process often has a de-escalating effect because communication is clear, fair, and transparent.
The debt collection process: step by step
A distinction is generally made between out-of-court and judicial debt collection. In out-of-court collection, the agency attempts to recover the debt without legal action. If this fails, judicial debt collection follows, where legal measures are used to enforce the claim.
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Reminder: the first step
The first step in the process is the reminder. As soon as an invoice becomes due and remains unpaid, the debtor receives a written notice. This reminder includes a request for payment of the outstanding amount as well as information about the consequences of non-payment.
It is important that the reminder clearly states all relevant details of the claim (invoice number, amount, and due date).
- 2
Debt recovery: when payment is not made
If the debtor does not respond to reminders and still fails to pay, the debt collection service takes over the active recovery process. Various measures are used to collect the outstanding amount:
Payment reminders: The collection agency contacts the debtor through multiple communication channels and repeatedly reminds them of the outstanding payment.
Personal contact: If necessary, direct conversations may be initiated to find a solution.
Legal consequences: The debtor is informed about potential legal steps, such as a court order for payment or enforcement proceedings, which may be initiated in case of continued non-payment.
- 3
Payment arrangements: when full payment is not possible
If the debtor is unable to pay the full amount immediately, a payment agreement can be arranged. Debt collection agencies are often willing to offer flexible payment plans that allow the debtor to settle the debt in instalments.
These agreements are documented in writing and include clear terms regarding instalment amounts and due dates. The goal is to find a mutually acceptable solution for both parties.
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Judicial dunning procedure: the final stage
If all out-of-court measures fail, the judicial dunning procedure is initiated as the final step. The collection agency applies for a court order for payment, which is formally served to the debtor.
This order requires the debtor to pay the outstanding amount within a specified period. If the debtor does not respond or does not file an objection, an enforcement order is issued. This enables the creditor to take enforcement actions, such as the seizure of assets.
What does debt collection look like in practice?
The following example from our day-to-day business shows what structured receivables management can achieve in practice – even with a high volume of small claims.
Case Study: Van Rental Business
A van rental company transferred 780 outstanding receivables from rental invoices, damages, and additional charges to Debtist within three months – representing a total volume of €312,000 and an average claim value of around €400 per case. Internally, follow-up had previously been inconsistent and time-consuming, with many cases handled too late or not pursued consistently.
The result after three months:
72% of the receivables were successfully recovered, corresponding to approximately €225,000. 58% of these were collected out of court, while a further 14% were recovered through judicial dunning procedures. The remaining 28% are still under active monitoring.
What this case clearly shows:
Even smaller claims in the low three-digit range can be processed efficiently at scale – provided the process is structured and initiated quickly.
What are the benefits of a debt collection service?
Effective receivables management starts before a payment default occurs:
Clear payment terms: Communicate deadlines and consequences transparently from the beginning.
Timely invoicing: Monitor incoming payments regularly, ideally in an automated way.
Credit checks: Assess the creditworthiness of new customers before entering into contracts.
If outstanding receivables still arise, an external service provider offers clear advantages:
Save time and resources: Your team can focus on core business activities instead of chasing payments internally.
Improve cash flow: Faster incoming payments strengthen financial stability and planning reliability.
Maintain customer relationships: Professional providers communicate respectfully and solution-oriented, helping to preserve customer loyalty.
Real-time transparency: Modern digital debt collection gives you full visibility over the status of your receivables at any time—via dashboard, without the need for follow-ups. You can instantly see which cases are open, which are in the dunning process, and what has already been recovered.
Legal framework
Debt collection in Germany is strictly regulated to ensure fairness and transparency. Collection services must comply with legal requirements set out in the Legal Services Act (Rechtdienstleistungsgesetz (RDG)).
Key legal principles include:
Registration and licensing: Debt collection agencies must be officially registered and authorised.
Transparency: Debtors must be fully informed about their rights and obligations.
Cost regulation: Fees must not be disproportionate and must be clearly disclosed.
Data protection: The protection of personal data is a top priority.
These regulations ensure that the process remains fair, transparent, and respectful of debtor rights.
Conclusion: the importance of debt collection
Debt collection is an essential part of modern business operations. It helps companies secure liquidity and maintain financial stability, while also supporting consumers in recognising and fulfilling their financial obligations.
A professional dunning and debt collection service enables efficient and customer-oriented recovery of outstanding receivables. By combining legal compliance with modern technology, these services ensure that the process is both fair and transparent.
Companies that rely on such solutions benefit from faster payments, improved financial planning, and reduced internal workload. In an increasingly complex and fast-paced business environment, effective receivables management is therefore crucial for long-term success.
