Debt Collection in Portugal

Are you a company that works internationally? Do you have a debtor in Portugal? Find out about possible procedures and actions to recover your unpaid invoices in Portugal.

With Sekundi, your invoice is in the hands of a collection professional established in the country of your debt.

Appropriate legal procedures to collect outstanding debts in Portugal

As for the procedural means of collection, in Portugal we have the following instruments:

  • European Injunction ;
  • Injunction procedure under Portuguese law ;
  • Court action for condemnation in the form of ordinary proceedings.

The first two processes are less expensive and faster, but should not be applied to more complex cases (disputes between debtor and creditor), especially if the debts are very large. Legal action is certainly the most time-consuming and costly procedure, but we know that many times it may be the only possible tool to be successful in collecting the requested amount.

How to establish an effective collection strategy in Portugal ?

We start by differentiating whether we are dealing with a B2B or a B2C customer. Additionally, we evaluate whether we are dealing with a portfolio in which there are still invoices/interest payments due or a portfolio that is already completely "terminated".

We collect all the data about the portfolio to be able to define the best strategies - for example the age of the debts and their average values. Regardless of whether the customer is B2B or B2C, there is one priority for us to be as successful as possible - decreasing the number of uncontactables by automating the sending of communications to reach the debtor's contact.

Then, assuming we are successful in contacting the debtor, the first approach is always focused on trying to obtain full payment or a payment plan, always assessing the debtor's solvency, to base these payment agreements on his or her real capacity and thus minimize the advance to judicial solution. The goal of avoiding advancing to the judicial phase stems from the nature of the system in Portugal, which despite some improvements is extremely slow and expensive. In Portugal they say "better a bad deal than a good demand".

How to manage relations with international debtors in Portugal?

Hiring a local recovery company can make it easier and even make a difference given their greater knowledge of legislation and standard practices.

This recognition by the debtor alone represents additional pressure, and the threat of legal action is a great tool, and the subsequent steps from the filing of the action to the enforcement of the decision are all facilitators of debt resolution.

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Automating the debt collection process in Portugal

The automation of processes ensures a tendentially unlimited capacity of interaction with debtors by sending automatic notifications (namely, SMS, VMS, Emails, 100% automatic calls through IVR/TTS) in a predefined timely manner, not subject to human error. Consequently and globally it is a much more effective process.

This capability can be taken to the extreme by using bots that using Artificial Intelligence are able to articulate automated speeches with debtors (e.g. CHATGPT). All these processes can be articulated with human contact structures and ensure maximized collection efficiency. Automated collection is surely the future - a machine does not "judge" and has no moods, but responds objectively to the debtor, always oriented toward collection.

Statistics on international debt collection in Portugal

Data from 2022 shows that :

  • In the consumer segment (B2C) the average payment terms offered to customers were 23 days and the average payment terms verified were 31 days - 8 days average delay ;
  • In the business segment (B2B) the average payment terms offered to customers were 44 days and the average payment terms checked were 57 days - 13 days average delay.

The same 2022 data shows that :

  • 71% of debtors who pay after the established payment dates turn out to be problematic, and that 75% of payments made with long delays are problematic.

These data reveal the importance of careful preventive management and active, assertive management after the debts are due - the role of credit recovery companies is crucial in this process.

Debt Collection Issues in Portugal

What are the costs and fees associated with debt collection?

As for out-of-court recovery fees, these are 100% dependent on the success of the collection and are a percentage of the amount collected that depends not only on the amount recovered but also on the age of the debt. The fees range from a minimum amount (usually less than 1%) in the case of preventive collections (triggered before the due date of the invoices), to amounts that can exceed 20% (being higher the longer the debts have been outstanding and the lower their average value).

How can customer information be used to improve collection?

The automation of processes is one of the trends in this industry, since the collection process is surely one of the most automated. The ability to analyze and process data is fundamental in this journey to create 100% automated processes, more effective than those that rely on human operators and manual or semi-automated practices. The development of artificial intelligence and data analytics are key elements in improving credit recovery processes.

How can I measure the performance of my collection strategy?

The performance measurement of recovery strategies can be done by:

  • Trend analysis - measuring the evolution of the result over time periods;
  • Comparative analysis - evaluation of performance in similar universes (similar periods of time, similar groups of customers, etc.) ;
  • Development and evaluation of champion and challenger strategies;
  • Where available, comparison with data from competing billing companies;
  • Development of customer (creditor) satisfaction surveys.
How to manage the risk of unpaid bills?

Automation, because it contributes to standardization and total control of the information that passes to the debtor, is a great tool in managing collection risks.

In parallel, the implementation of quality processes also allows for a decrease in errors and consequently a mitigation of risks.

The defense of a strong culture of rigor, respect for debtors, and an ever-present internal audit also allows us to mitigate collection risks.

The use of technology, particularly speech analytics tools, allows the automatic detection of speech errors and banned words, which in turn allows the identification of specific training needs of the teams and the mitigation of collection risks.

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