Outsource Collections With an Outsource Collection Agency or Outsourced Debt Collection Software

Outsourcing collections costs 20% to 50% of what is recovered with a contingency agency, roughly $10 to $24 per account with a flat fee letter program, and about $500 to over $7,000 a month with an AR outsourcing firm. Software that runs the follow up for you costs a flat monthly fee, $49 to $499 with DebtAgent.

The headline number is rarely the full cost. Contingency agreements usually include a direct payment clause, so a customer who pays you the week after placement still earns the agency its cut. Flat fee programs charge for every account placed, including the ones that were already paid and never matched, which is why it pays to reconcile before you place. AR outsourcing firms quote setup and minimum terms that often run 12 months. We break the agency side down further in our guide to how much collection agencies charge.

Outsourcing collections is worth it for customers who have stopped responding, disputed the debt, or need phone work, skip tracing or legal action, because those jobs need a third party. It is rarely worth it for invoices that are simply late, because an agency takes 20% to 50% of money a consistent reminder sequence would have recovered.

The arithmetic is blunt. Invoices under 90 days past due are recovered at roughly 70% or better by whoever keeps asking. Past 180 days the figure often drops below 15%. An agency placed at day 45 is paid a quarter of a payment that was probably coming anyway. Placed at day 150 on a silent customer, the same agency is the cheapest way to get anything at all. The decision is about timing, and a contingency collection agency earns its percentage at the back end of the aging report, not the front.

Outsource first party collections when you want the follow up done in your own company's name and the customer relationship kept intact; outsource third party collections when the relationship is over and you want another company's name on the pressure. Most US businesses need first party help on most invoices and third party help on a few.

First party outsourcing used to mean paying a team to send letters and make calls under your letterhead. CollBox, for example, sells done for you first party collections to law firms at $599 a month for 1 to 50 clients plus a $999 setup fee on a 12 month commitment. Software now covers the written part of that job for a fraction of the cost, which is the gap DebtAgent fills. Our first party collections page compares the two in more detail, and the CollBox alternative page works the law firm numbers.

The main disadvantages of outsourcing collections are cost, loss of control over tone, and damage to customer relationships. A contingency agency keeps 20% to 50% of recoveries, often including payments made to you directly, and a third party letter tells your customer the relationship has changed, which some of them will not forget when they next place an order.

There are quieter costs too. Most placement agreements limit when you can withdraw a file, and some charge a fee for doing it. Flat fee programs often expire unused accounts (Rocket Receivables Stage One accounts expire 12 months after purchase). AR outsourcing firms need access to your ledger and usually a minimum term. None of these are reasons to avoid outsourcing a genuinely stuck file. They are reasons not to outsource the whole aging report by default.

Yes. You can outsource the follow up part of accounts receivable collections to software, which sends a scheduled, escalating sequence in your name, tracks promises to pay and stops when an invoice is paid, without a third party ever contacting your customer. You stay the creditor and keep every dollar collected.

That is what DebtAgent does. Upload your overdue invoices as a CSV export or type them in, approve the drafted sequence once, and it runs. Starter covers 50 active debtors for $49 a month, Plus covers 250 for $149, and Pro is unlimited for $499. If you are weighing the full outsourced model instead, our accounts receivable outsourcing page compares what those firms cost against keeping AR in house, and the cheap collection agency comparison ranks every published per account and percentage price by invoice size.

We would rather you placed the right files than none. Send an account to a collection agency or attorney when any of these is true: the customer has not responded to anything for 60 days or more, the customer disputes the amount and you have the paperwork to prove it, the business appears to be closing or has moved, or the claim is large enough that suit is realistic. DebtAgent holds no collection agency license, does not skip trace, does not report to credit bureaus and does not file suit.

For flat fee placement, compare the published cards on our flat fee debt collection page. For claims worth suing over, the commercial collections attorney page covers how contingency and hourly legal work is priced. Either way, arrive with the log of every message already sent. It shortens the agency's work and helps if the file ends up in court.