Almost every business has an invoice that simply will not get paid. The hard question is not whether to chase it but when to hand it to someone else. Send it too early and you may lose a customer who was only distracted. Wait too long and the money gets harder to recover. This guide answers the questions owners and finance teams ask most.
How overdue is overdue enough?
There is no universal deadline, but these thresholds work as a practical guide:
- 1 to 30 days late. Treat it as a reminder problem. Most late payments are oversights or approval delays.
- 31 to 60 days late. Escalate personally. A phone call and a written notice should be on file.
- 61 to 90 days late. Final demand stage. State clearly that the account will be placed with an agency if it stays unpaid.
- 90 days or more. Seriously consider an agency. Recovery rates fall the longer a debt ages, and many agencies get their best results on accounts under six months old.
Adjust for your payment terms and sector. An invoice on 90-day terms is not late at day 60, while a customer who has gone silent, changed address or shown signs of insolvency may justify acting sooner.
What should you do in-house first?
Confirm the debt is undisputed
Check that the goods or services were delivered, the invoice was received and no credit note is pending. Agencies struggle to collect disputed amounts, and a wrong claim can cost you the customer and your reputation.
Reach the person who actually pays
Contact accounts payable, not only the person who placed the order. A short call often uncovers a missing purchase order or a bank error that a third email would never find.
Follow a clear escalation sequence
Send a friendly reminder, then a firm follow-up, then a formal final notice stating the amount, a firm date, any late fees your contract allows and what happens next. Keep every message short and factual.
Pause new work
Stop new orders or deliveries on an account with a large overdue balance. It limits your exposure and often gets attention faster than any letter.
How much does a collection agency cost?
Most agencies work on contingency: they keep a percentage of what they recover and charge nothing if they collect nothing. Fees commonly fall between about 15% and 30% of the amount collected, with older, smaller or cross-border debts at the higher end. Some agencies add flat fees or monthly minimums, so ask for the full fee schedule in writing. On a 5,000 invoice recovered at 25%, you receive 3,750. That is far better than nothing, but it shows why a successful in-house effort at day 45 beats an agency at day 180. Compare this with legal action, which usually means upfront court and lawyer costs.
What about relationships and compliance?
An agency acts in your name, so its behavior is your reputation. Choose a licensed, professional agency and ask how it handles complaints. Rules differ by country: many regulate contact hours, tone, what may be disclosed to third parties and how personal data is processed, and consumer debts are usually regulated more strictly than business debts. Check the limitation period too, since in many places an old debt becomes unenforceable after a few years. Have a lawyer review your agency contract and letter templates once. For a strategic customer, consider a final call from a senior person before the account leaves your hands.
What should you prepare before handing over an account?
- The signed contract or order confirmation, with payment terms
- Invoices, statements and proof of delivery or completion
- A dated log of every reminder, call and reply
- The final notice you sent
- Current contact details, including the legal entity name and registration or tax number
- Any disputes, partial payments or promises to pay
Clean paperwork speeds up recovery and protects you if the debtor challenges the claim.
What alternatives are there?
- Payment plan. Instalments with a signed schedule often recover more than a hard line, especially from a customer who is willing but short of cash. Require a first payment up front and a clause that the full balance falls due on a missed instalment.
- Partial settlement. Accepting 80% now can beat chasing 100% for a year, if the customer is financially stretched.
- Mediation or small-claims court. Suitable for mid-sized, clearly documented debts where you want a binding outcome.
- Write-off. For very small balances, the cost of recovery may exceed the amount. Record it and learn from it.
A practical approach
Set your own timeline and stick to it, for example reminders at day 1 and 14, a call at day 30, a final notice at day 60 and agency placement at day 90 if there is no agreement. Tracking this by spreadsheet works until the volume grows. If it does, a tool such as FulcrumGrid Collection can keep reminders, promises to pay and notes per account in one place, so the paper trail is ready when you need it.
Try to collect it yourself, document everything, and send an account to an agency when your own steps have honestly run out.
Frequently asked questions
Will a collection agency damage my customer relationship?
It can, which is why you should try your own steps first and warn the customer before placing the account. A professional agency that follows the rules and keeps a respectful tone limits the damage.
Can I charge interest or late fees before using an agency?
Usually yes, if your contract or the local law allows it and you stated it on the invoice or terms. Check the rules for your country, since some cap the rate.
What if the customer disputes the invoice?
Resolve the dispute first. Most agencies will not accept a disputed account, and pushing a contested claim can harm your reputation and weaken any later legal case.
Is it better to sell the debt or use an agency on contingency?
Selling gives you immediate cash but at a steep discount, often a small fraction of face value. Contingency keeps more upside if the debt is collectible. Sales mainly suit old, large portfolios.
FulcrumGrid Collection
Keep every overdue account on track
FulcrumGrid Collection helps you schedule reminders, log promises to pay and keep a clean history per account, so you know when it is time to escalate.