When should I send an invoice to a collection agency?
When to send an invoice to a collection agency — the honest framework
Short answer
Only after three first-party call attempts have failed and the customer has either gone silent or refused to pay. Sending earlier costs you 30-50% of the recovered amount and ends the customer relationship permanently. If the invoice is under $500 and aged past 120 days, it is usually cheaper to write off than to collect through an agency.
The conventional advice — send to an agency at 90 days — is the default, not the right answer. It works for credit card issuers because they have already exhausted their first-party options and the relationship is gone. For a small service business, day-90 agency referral is usually too early on the relationship side and too late on the recovery side.
The decision framework worth using has four inputs. First, has the customer been contacted by phone — not just emailed? If no, agency referral is premature; you have not actually tried collecting. Second, is the customer in dispute, or just non-responsive? Disputes get worse in agency hands; non-responsive accounts may genuinely be lost. Third, what is the invoice size? Most agencies will not work invoices under $500-$1,000 because their take does not justify the labor. Fourth, what is the relationship value over the next twelve months? An agency referral is a hard line; you almost never get the customer back.
If the answer is: tried calling three times, customer is non-responsive (not disputing), invoice is over $1,000, and the relationship is already lost — agency is the right move. Expect to recover roughly 30-50% of what is collected after their fee, and expect the customer to never come back.
If the customer has not yet been called, or the invoice is under $500, or the relationship is salvageable — do not send. The math on small invoices through agencies is brutal: the agency keeps 30-50%, your time managing the file is real, and the recovered amount net of effort often underperforms a clean write-off.
Most service businesses skip the first-party call layer entirely and jump straight to agency referral or write-off. Closing that gap is what Syntharra does: the day-3 call gets made, the polite second and third attempts get made, and the agency-track decision happens with cleaner data than 'we sent emails and nothing happened.'