Definition
Collections is the stage of pursuing an unpaid invoice after normal reminders have failed, through a formal demand letter, a collections agency, or legal action such as small claims court. Agencies typically keep 20 to 50 percent of what they recover, so collections is a last resort for significant balances.
Also called: Debt collection, Collections agency
Collections in practice
Before escalating, confirm the debt is undisputed and documented: contract or accepted quote, invoice, proof of delivery, and the reminder history. For small amounts, a formal letter alone often prompts payment.
Frequently Asked Questions
When should I send an invoice to collections?
After 90 days overdue and several documented reminders, when the balance justifies the agency's fee, and when you are prepared to lose the client relationship.