When to hire a collection agency — and when not to

When a receivable becomes high-risk, one option is to hire a collection agency. But an agency is not the right solution for every case. In some situations it makes sense — in others, it does not.

In this article, we explain when it is worth hiring an agency — and when it is better not to.

When NOT to hire an agency

There are situations where an agency has nothing to offer — or where it is better to handle the matter yourself.

1. The receivable is young — less than 30 days

If the invoice has not yet fallen due, or less than 30 days have passed since the due date — there is no need for an agency. At this stage, a reminder is enough.

Why: An agency works on a percentage. For a young receivable, that percentage does not make sense — neither for you nor for them.

2. The receivable is small — below €20,000

For receivables below €20,000, an agency often does not make economic sense. The cost of engagement can exceed the value of the receivable.

Why: Agencies usually work on 10-20% of what is collected. For a receivable of €5,000, that is €500-1,000 — which is little for serious work.

3. The business relationship is alive

If the client is a long-standing partner — an agency can damage the relationship. It is better to talk to the client yourself.

Why: An agency is a third party. Its involvement can be perceived as a lack of trust.

4. The debtor is in bankruptcy

If the debtor is in bankruptcy or insolvent — an agency cannot collect. There are no funds to collect.

Why: An agency works on collection. If there is nothing to collect — there is no work.

When TO hire an agency

There are situations where an agency makes sense — and where it can speed up collection.

1. The receivable is old — more than 60 days

If the receivable is more than 60 days old — it is time to consider an agency.

Why: After 60 days, the likelihood of collection drops significantly. An agency can speed up the process.

2. The receivable is significant — €20,000+

For receivables of €20,000 and above — an agency makes economic sense.

Why: A percentage of 10-20% is worth it for an agency, and acceptable for you.

3. Standard attempts have not worked

If you have sent 3-4 reminders and there is no response — it is time for an agency.

Why: If reminders do not work, the problem is not frequency — it is the approach. An agency has a different approach.

4. You have no time or resources

If your team has no time to deal with collection — an agency takes the burden off you.

Why: Collection requires time, analysis and communication. If you do not have that — an agency does it for you.

5. The receivable is cross-border

If the debtor is abroad — an agency has an advantage.

Why: An agency knows how to communicate with foreign companies — language, culture, legal framework.

What to look for in an agency

If you decide to hire an agency — here is what to look for:

1. Fee model

• 10-20% of what is collected — not upfront
• No fee if nothing is collected

2. Individual approach

• Not mass collection
• Analysis of each case

3. Transparency

• Clear terms
• No hidden costs

4. Honesty

• If the assessment shows there is no room — they should tell you

What you can do next

If you have a receivable of €20,000 or more and standard collection attempts have not worked — it is worth considering hiring an agency.

But before that — check whether it makes sense. If the receivable is not for an agency — a write-off or legal route may be better options.

If you'd like to learn more about how we approach cases like these, visit alterclaim.rs/en or contact us at info@alterclaim.rs.