When to escalate invoices to a debt collection service?

If you're asking yourself if it's time to bring in a third-party debt collection agency to recover an invoice, it's time. 

Small businesses often avoid bringing in a debt collection agency, and I don't blame them. The old style of collections can be alarming. 

Typical agencies charge incredibly high fees taking between 20% to 35% of your total invoice. Often collectors can be extremely pushy and downright aggressive. Debt collectors may be the one profession hated more than a used car salesman. 

This type of collection can burn bridges with customers and damage your reputation. Therefore, the correct answer for when to escalate to this type of agency is never. 

However, debt collection can be a helpful tool and a necessary step to get your invoices paid. And luckily, times have changed. 

InvoiceRecover is a new type of collection agency. A friendly debt collection agency. We're built specifically for small businesses and freelancers. We offer a fully automated service designed to maintain happy and healthy customer relationships—all for one low flat rate.

So, don't be scared of moving an invoice to collections. Instead, you can use these few key metrics to determine if it's time to escalate an invoice or not. 

Time: 60-90 days past due

Most companies offer a net 30-day payments terms. Giving clients an additional grace period to pay their invoice is good practice. However, waiting too long to escalate dramatically diminishes your chances of getting paid.  

We recommend escalating invoices that are 60-90 days overdue.

Invoices in this range are still highly relevant to your clients. The work you completed is still fresh and hasn't fallen too deep into their minds. A long delay between work completion and payment, or invoicing and collections, creates space for other bills to stack up and risks your invoice being pushed down the pile even further. 

Quicker escalation can let your client know you're serious about getting paid and won't sit idly by with no action.  

Quantity: Three or more unpaid invoices

Multiple unpaid and overdue invoices are a warning sign. If outstanding invoices are starting to stack up, it could signify that your client is struggling with cash flow. Likely your client has other unpaid invoices too. The longer you wait, the longer the recovery line will be.  

When multiple invoices are involved, clients understand the situation and are less surprised by bringing in a collection agency. This situation can soften your burden and should make it easier for you to make a tough decision. 

Bonus: Consider halting further work or delivery until past invoices get paid. This threat alone can prompt clients to take action and make payments.

Amount: Invoice total of more than $250 

When you consider bringing in a collection agency, total dollars at stake is a prominent factor. There's a clear tradeoff between the amount of time and effort involved and the amount recovered. 

Most commonly, invoices below $250 do not get turned over to collections.  

If you're using a traditional collection agency, giving up almost half of a small invoice may not be worth it. However, InvoiceRecover only charges a flat fee of $29 per invoice and fully automates the process making the tradeoff of time, effort, and recovered amount easier to manage.  

Responses: Zero responses from your client 

It's never fun getting ghosted. But, a clear sign that it's time to outsource an invoice for collections is when your client has stopped responding to you. 

If you've sent the invoice, followed up multiple times, had hard conversations, and are now hitting a brick wall, a third party might help. Unfortunately, you cannot do much if clients have become used to dismissing your emails and avoiding your calls. Bringing in a new voice, new number, and new email can reignite the process. 

Bringing in a third party also amps up the pressure. It shows your client you mean business. For example, a single email from a debt collection service often sparks a quick response from your client. 

When to turn an invoice over to a debt collection agency is never an easy decision to make. And you shouldn't take it lightly. But your business is important too, and you deserve to get paid for your work. If you have invoices or customers that meet the above criteria. In that case, it's time for you to get started with a collection agency and get paid already. 

Are you looking for an easy and affordable collection agency that cares about treating your clients right? In that case, you should learn more about InvoiceRecover

Get your overdue invoices paid.

“I got an invoice paid that was six months past due. I thought it was lost, but InvoiceRecover collected!”
Ben De Rienzo
Freelance Designer