When to Use a Collection Agency (and When Not To)

When should you use a collection agency?

A collection agency makes sense as a last resort: when an invoice is badly overdue, the customer has stopped responding or is insolvent, your own outreach is exhausted, and the amount is large enough to justify the fee. For everything else, especially current accounts and customers you want to keep, collections software recovers more at far lower cost.

Signs it is time for an agency

• The invoice is 90 to 120 days or more past due with no progress.
• The customer has gone silent after repeated, professional outreach.
• The customer is insolvent or out of business.
• You have effectively written the debt off internally.

What a collection agency costs

Agencies charge a contingency fee, often 25 to 50 percent of what they recover, so the math only works on amounts large enough to justify it. Beyond the fee, you hand over control of the conversation and the customer relationship rarely survives. That is an acceptable trade for debt you have already given up on, and a poor one for an account you still want.

When software is the better call

For current and recently overdue accounts, and any relationship you want to preserve, collections software is the stronger choice. It works early, in your name, for a predictable cost, and keeps most accounts from ever reaching agency territory. Monk customers see 40 percent or greater DSO reduction and resolve more than 90 percent of issues without escalation.

A simple framework

How Monk fits

Monk automates collections early so accounts rarely reach the point of needing an agency. Its intelligent collections read intent, submit to 600+ AP portals, and apply cash back to your ERP, all while keeping the relationship in your hands.