How much do collection agencies charge to collect unpaid invoices?
How much do collection agencies charge to collect unpaid invoices?
Short answer
Collection agencies typically charge 25–50% of the amount recovered as a contingency fee. The older and smaller the debt, the higher the rate. For most B2B service invoices, first-party follow-up is significantly cheaper.
Collection agency pricing is almost always contingency-based. You pay only when they collect, but you pay a percentage of what they recover. Standard rates for B2B commercial debt under 90 days old typically run 25-35%. Debt over 90 days, or debt that has already been through one collection attempt, usually costs 35-50%. Some agencies charge a flat rate for soft collection (letters and calls before litigation) and a higher rate when they have to pursue legal action.
Run the math before placing an account. A $5,000 invoice at a 35% contingency means you net $3,250 at best, and that's if they recover the full amount. Agencies often settle for less than the full balance, so the actual net is often lower. Compare that to first-party follow-up: a well-run internal AR process, or an AI-assisted tool like Syntharra, costs a fraction of agency rates and recovers more of the original balance.
Agencies are most appropriate for accounts over 120 days past due that have not responded to your own follow-up, accounts where the customer has moved or is hard to locate, and portfolios of small accounts where your staff time isn't worth spending. For accounts under 90 days old where you still have a working relationship with the customer, exhaust your own follow-up first. The contingency math almost always favors self-collection for recent, responsive debtors.