Outsource collections: how small and growing businesses hand off unpaid invoices
To outsource collections, a business places past-due invoices with a third party, usually a collection agency on contingency, a collection attorney, or automated collection software. Industry guidance points to placing accounts around 60 to 120 days past due, or sooner when the customer stops responding. You keep ownership of the debt.
What does it mean to outsource collections?
Outsourcing collections means handing the follow-up on unpaid invoices to a specialist instead of chasing them yourself. For business debts, that specialist is usually a commercial collection firm (a collection agency that focuses on money owed by businesses), a creditor-rights attorney, or software that automates reminders.
Definition: third-party collections means an outside firm contacts your customer in its own name. First-party or pre-collection services contact customers in your name, earlier in the cycle.
When should you outsource collections?
The International Association of Commercial Collectors (IACC) advises referring an account when your team “loses effective contact with the debtor,” for example when requests are ignored or a payment plan is broken, and puts the average referral point at 60 or 90 days past due[source]. Business News Daily reports most companies place accounts at 90 to 120 days[source]. Waiting costs money: see the table below.
| Time past due | Probability of collecting (CLLA chart) |
|---|---|
| At due date | 98% |
| 30 days | 94% |
| 60 days | 85% |
| 90 days | 74% |
| 6 months | 58% |
| 9 months | 43% |
| 1 year | 27% |
| 2 years | 14% |
Source: Commercial Law League of America, “Probability of Recovering Commercial Debt with Age”[source]. The figures describe commercial accounts in general, not any particular agency’s results.
Who can you outsource collections to?
| AI / automated collection | Collection agency | Collection attorney | |
|---|---|---|---|
| Best for | New, smaller past-due invoices; customer still reachable | Silent or slow payers; aging invoices you want handled | Large balances, guarantees, disputes, suits and judgments |
| Typical pricing | Software subscription or per-use fees | Usually contingency: a share of what’s recovered | Contingency, hourly or flat fees, plus court costs |
| Locates debtors | Rarely | Yes (skip tracing, business research) | Through investigators or agencies |
| Can sue | No | No; forwards to attorneys | Yes |
| Tone | Light, automated | Firm, third-party | Formal, legal |
Compare them in depth in collection agency vs attorney vs AI, or read about AI debt collection and when to hire a debt collection attorney.
How much does outsourced collections cost?
Most agencies work on contingency. Business News Daily reports typical contingency fees of 20% to 50%[source]; the U.S. Chamber of Commerce gives 25% to 50%[source]. The IACC recommends getting the fee schedule in writing[source]. See contingency vs flat fee collections and the net-after-fees calculator.
How to outsource collections in five steps
- Set an aging cutoff, such as 60 or 90 days past due.
- Send a final demand with a deadline (use our demand letter template).
- Gather documents: invoices, contract or PO, proof of delivery, correspondence. See what a collection agency needs.
- Choose a firm using our questions to ask a collection agency.
- Sign, place and stop direct contact, then track reports.
What standards should a collection firm meet?
Check licensing and bonding where required; the IACC requires its members to be bonded[source]. CLLA-certified agencies undergo an annual independent CPA audit and keep verified trust accounts and a surety bond[source]. ACA International, founded in 1939, sets ethical standards for its members[source]. Read our partner standards.
Get matched: agency, attorney, AI or certified firm
Tell us about the unpaid invoice and choose a preferred option, or let us recommend one: AI/automated collection, a collection attorney, a collection agency (local or national), or an IACC member, CLLA-certified or ACA International member agency. Matching is free, and nothing is placed until you approve a partner’s written terms.
Prefer email? Write to [email protected].
Frequently asked questions
Is outsourcing collections worth it for a small business?
Often, once internal reminders stop working. The IACC notes that a small share of delinquent accounts can consume a large share of a credit department’s time, and most agencies charge only if they recover money.
Will outsourcing collections hurt my customer relationships?
It can change the tone, which is the point. Choose a firm whose approach matches your brand and ask how it contacts customers before you sign.
Do I lose ownership of the debt?
No. When you place an account with an agency or attorney, you keep ownership. Selling a debt is different, and we don’t buy debts.
Can I outsource only some invoices?
Yes. Most owners keep newer invoices in-house and place only the accounts that have stopped responding or passed their aging cutoff.
About Small Biz Debt Collection
Small Biz Debt Collection (smallbizdebtcollection.com) is a free matching service that connects U.S. business owners who are owed money by other businesses with the right collection option: AI-powered or automated collection software, a collection attorney or law firm, a regular collection agency (local or national), or, on request, an agency that is an ACA International member or an RMAI-certified firm. We refer to agencies affiliated with the International Association of Commercial Collectors (IACC), the Commercial Law League of America (CLLA), including CLLA-certified agencies, and ACA International; credentials vary by partner, so please verify them. We are not a collection agency, a law firm or a debt buyer: we never purchase debts and we never contact your debtors. Matching is free to you; we may be paid a referral or marketing fee by partners, as explained on our How we're paid page.
Sources: IACC, “Commercial Collection Guidelines for Credit Grantors” (2018); Business News Daily, “The Best Collection Agency Services” (page last updated Oct 17, 2024); U.S. Chamber of Commerce CO—, “What Is a Debt Collection Agency, and When Do You Need One?”; Commercial Law League of America, “Probability of Recovering Commercial Debt with Age”; CLLA Certified Agencies, certification program page; ACA International, “About” (accessed Oct 18, 2026).
Owed money by another business?
Tell us about the unpaid invoice and we’ll match you with an experienced collection partner suited to its size, age and location. Matching is free.
Get matched with a collection partner