In situations where companies face the problem of unpaid invoices for goods and services, the recovery of receivables becomes a key element in maintaining financial liquidity. In Portugal, there are several methods of debt enforcement that differ in terms of duration and costs. In this article, we will discuss the various approaches to pursuing claims, present approximate costs associated with their implementation, and indicate optimal solutions.

 1. Mediation and Out-of-Court Negotiations

Mediation and out-of-court negotiations are often the first step taken by companies. The effectiveness of this method largely depends on the debtor’s willingness to cooperate, which is not always guaranteed. This method is only applicable if the debtor agrees to enter negotiations. If the debtor persistently avoids payment and contact with the creditor, this method has no practical application.

Duration

Under favorable conditions, disputes can be resolved within a few days or weeks; however, a lack of cooperation from the debtor can significantly prolong the entire process.

Costs

• Mediation

A single mediation session in commercial matters can cost from approximately 500 to 1500 euros. In some cases, these costs may be shared between the parties, thereby reducing the financial burden on an individual company.

• Out-of-Court Negotiations

If negotiations are conducted with the assistance of lawyers or financial advisors, the costs may be determined on an hourly rate basis, which in Portugal typically amounts to between 100 and 200 euros per hour. The total cost of such negotiations may therefore amount to approximately 500 to 2000 euros or more, depending on the number of hours required to reach an agreement.

These fees must be paid regardless of the outcome of the negotiations. Thus, this method is associated with upfront costs which, in the absence of a successful result, constitute a risk of additional losses.

 2. Judicial Proceedings

The creditor may decide to formally pursue their claims through judicial proceedings. Such actions yield the most effective outcome in the form of obtaining a Court Order for Payment. With such a payment order, debt enforcement becomes straightforward. However, its effectiveness depends on the debtor’s financial situation and the assets they possess. If the debtor is active in the market and owns any assets, the debt will likely be recovered. In the case of an insolvent debtor, the desired effect will not be achieved, and enforcement may take years and ultimately prove ineffective.

In Portugal, two main paths of debt recovery by judicial proceedings can be distinguished:

• Ordinary Judicial Proceedings

Duration

It can take from several months to even 1–2 years, depending on the complexity of the case and the caseload of the courts.

Costs

Court fees: Depending on the value of the dispute, these can range from a few hundred to several thousand euros.

Legal representation costs: Particularly in longer proceedings, these can be very high due to the hourly rates charged by lawyers in Portugal, which typically range from 150 to 300 euros per hour.

• Summary Enforcement Procedure (Procedimento de execução)

Duration

When the debt is well documented (e.g. through invoices, contracts, or other documents confirming the obligation), it is possible to apply this enforcement procedure, which significantly shortens the time required to pursue claims. Under ideal conditions, the entire process may take from 3 to 6 months.

Costs

Although this procedure is faster, it is not necessarily inexpensive – it still involves the aforementioned upfront costs in the form of court fees and legal fees.

 3. Collaboration with Debt Collection Companies

Another option is to use the services of debt collection companies that specialise in recovering debts. They employ various out-of-court methods of pressure within the framework of Portuguese law. Most commonly, these methods involve written and telephone contacts with debtors, urging them to repay the debt in order to avoid costly judicial proceedings. Very often, these actions are effective and the power of persuasion proves to be a sufficient argument for the repayment of the debt.

Duration

Thanks to their experience and specialised tools, these companies often shorten the time required to recover receivables, achieving results within a few weeks or, at most, a few months.

Costs

In Portugal, the market is mainly dominated by large international corporate debt collection firms, which charge upfront fees regardless of the outcome, meaning additional costs even in cases where the debt is not successfully recovered. There are also smaller companies that charge an initial fee irrespective of the result, and then add an additional commission based on the amount recovered.

The GLRD Offer

With regard to the costs borne by creditors, the model proposed by GLRD is noteworthy. It stands out from the competition as no upfront fee is charged. GLRD’s remuneration consists solely of a commission on the recovered amount – if the debt collection actions do not yield results, the creditor incurs no costs. In practice, this minimises the financial risk for the creditor, which is particularly attractive for companies struggling with delayed payments. The indicative commission may be determined as a percentage depending on the value of the recovered debt, making the offer highly competitive in the Portuguese market.

Summary

In Portugal, companies have at their disposal several methods for enforcing debts arising from unpaid invoices. Each method is characterised by different costs and durations:

• Out-of-court negotiations are relatively cheap and the fastest method, but their effectiveness depends solely on the debtor’s willingness to cooperate.

• Judicial proceedings, especially via the summary enforcement procedure, allow for effective pursuit of claims, but are associated with significant court fees and legal representation costs.

• Collaboration with debt collection companies offers comprehensive support; however, standard practice in the market involves upfront fees regardless of the outcome.

When choosing a method for debt enforcement, companies should consider both the costs and the duration of the process. The GLRD offer, with no upfront fees and based solely on a commission payable only in the event of successful recovery, can constitute an attractive alternative, particularly in view of the high costs associated with the other methods. We encourage a thorough analysis and selection of the solution best suited to the specific nature of the debt and the needs of the company.