What is the principal amount (hoofdsom)?

The principal amount is the total of the invoices excluding interest and other costs. When a company engages a collection agency to collect invoices, one often refers to a principal amount.

Costs on top of the principal amount

When a collection agency begins collecting an invoice, a number of costs are added on top of the principal amount. First of all, collection costs are calculated as compensation for the services of the collection agency. After all, extra actions must be performed to get the invoice paid.

In addition, interest is calculated on the principal amount. Someone who does not pay an invoice can be compared to someone who borrows money. With a loan, you also owe interest to the bank.

Principal amount with multiple invoices

If a company has a collection agency collect multiple invoices for the same customer, these are in principle always added together. Otherwise, the customer would have to pay collection costs for each invoice separately, and that is not fair. By adding the amounts of the invoices together, one large principal amount is created, so to speak. This combined principal amount is then increased by collection costs and interest.