How Much Does it Cost to Send Someone to Collections: Agency Fees Explained

Key Takeaways

• Most commercial debt collection agencies operate on a contingency fee basis, where you pay nothing upfront and may pay around 10–25% of successfully recovered amounts.
• Collection costs vary based on debt age, size, complexity, and volume, with newer debts typically commanding lower fees while older, more challenging accounts require higher percentages.
• Additional expenses like court filing fees and legal costs may apply if collections escalate beyond standard contact attempts to formal legal action.
• The contingency model eliminates financial risk for businesses since agencies only earn when they successfully recover funds, making professional collections accessible regardless of company size.
• Southwest Recovery Services combines over 20 years of commercial collection expertise with AI-guided tracking and contingency-only pricing, helping B2B companies recover unpaid invoices without upfront costs or risk to client relationships.

Collection Agency Costs: What You’ll Actually Pay

When invoices go unpaid and internal collection efforts stall, bringing in a professional collections agency becomes the logical next step. But if you’re a business owner or CFO evaluating this option, you’re probably asking: what will this actually cost me?

Here’s the straightforward truth: most reputable commercial debt collection agencies work on a contingency fee basis. That means you pay nothing upfront, no monthly retainers, and no fees unless the agency successfully collects your money. When they do collect, you pay a percentage of the recovered amount.

For most commercial collections, that percentage typically ranges from 15% to 40% of what’s recovered. If an agency collects $10,000 on your behalf at a 30% rate, you pay $3,000 and keep $7,000. If they collect nothing, you owe nothing.

This model aligns the agency’s interests directly with yours. They succeed only when you do, which means they’re motivated to recover as much as possible while handling accounts professionally to preserve your business relationships.

What Determines Your Collection Agency Fee?

Not all debts cost the same percentage to collect. Several factors influence where your accounts fall within that recovery rate range:

Age of the Debt

Fresh debts are easier to collect. For example, an invoice that’s 60 days overdue typically requires fewer contact attempts than one that’s 18 months old. Agencies generally charge lower percentages for newer debts and higher rates for aged accounts that require significantly more effort.

Size of the Debt

Smaller debts often carry higher percentage fees because the collection effort doesn’t scale proportionally with the amount. Recovering a $500 invoice might require the same number of calls and research as recovering a $5,000 invoice. Larger debts typically command lower percentage rates.

Volume of Accounts

If you’re placing multiple accounts with an agency or establishing an ongoing relationship with regular placements, you’ll likely negotiate better rates. Agencies value consistent clients and can offer volume discounts when handling dozens or hundreds of accounts.

Complexity of the Account

Straightforward, undisputed debts where the debtor simply hasn’t paid cost less to collect than complex situations involving disputed charges, multiple parties, or debtors who’ve relocated. Accounts requiring legal action will also typically involve higher fees and additional costs.

Contingency vs. Flat-Fee Models

While contingency fees dominate commercial collections, you may encounter agencies offering flat-fee arrangements.

Contingency Fee Model

This is the standard for commercial debt recovery. You pay a percentage only when the agency successfully collects. The risk sits entirely with the agency, making this approach particularly attractive for businesses uncertain about recovery prospects.

Flat-Fee Model

Some agencies charge flat fees per account, typically $50–300 for early-stage collection attempts. This approach is more common for high-volume, low-dollar consumer debts. For complex commercial debts where recovery isn’t guaranteed, flat fees are less common because agencies can’t afford to invest significant resources without assured compensation.

For most businesses dealing with commercial invoices, the contingency model offers the best value and lowest risk.

Additional Costs to Consider

While contingency fees cover standard collection efforts, including phone calls, emails, letters, and negotiation, certain situations may involve additional expenses:

Legal Action Costs

If collection efforts require filing a lawsuit, you may face court filing fees, process server costs, and attorney fees beyond the agency’s standard commission. Reputable agencies discuss these potential costs upfront before proceeding with legal action.

Skip-Tracing & Investigation

Most agencies include basic debtor location services within their contingency fee. However, if your debtor has disappeared and requires extensive investigation, some agencies may charge additional fees for advanced skip-tracing services.

Interest & Late Fees

Depending on your original contract terms and state law, you may be entitled to charge interest or late fees on unpaid invoices. These amounts typically accrue during the collection process and are subject to the same contingency percentage as the principal debt.

The key is working with a transparent agency that clearly explains all potential costs before you place accounts.

Why Paying a Collection Agency is Worth It

When faced with a 15% to 25% contingency fee, some business owners hesitate. Here’s why professional collection services deliver genuine value:

Recovering Something Beats Recovering Nothing

That unpaid $10,000 invoice sitting in your aging receivables isn’t worth $10,000; it’s worth $0 until you collect it. If a professional agency can recover $7,000 after their 20% fee, you’ve converted a complete loss into actual cash.

Time is Money

Every hour your staff spends chasing unpaid invoices is an hour they’re not spending on revenue-generating activities. When you calculate the true internal cost of collections, including salaries and lost productivity, professional agencies often cost less than handling it in-house.

Expertise Drives Results

Professional collectors bring specialized skills, proven negotiation strategies, and a deep understanding of debtor psychology that internal staff typically lack. This expertise translates directly into higher recovery rates and legal compliance protection.

Relationship Preservation

Skilled collection agencies can actually strengthen business relationships by helping struggling customers work through temporary financial challenges professionally. A third-party agency creates professional distance while maintaining respect.

Southwest Recovery Services: Delivering Efficient Collection Services

At Southwest Recovery Services, we bring over 20 years of specialized commercial debt collection experience exclusively focused on B2B recovery. Our contingency-only model means zero financial risk for you—no upfront fees, no monthly retainers, no charges unless we successfully recover your funds.

We combine technology with human expertise through AI-guided tracking systems that monitor every account across all communication channels, including phone, email, text, and mail. Our founder’s daily involvement provides strategic oversight that automated systems alone cannot deliver.

With our 12 offices across the country, we offer geographic coverage for nationwide collections while maintaining personalized service. Our priority sectors include trucking, logistics, contractors, oil and gas, and wholesale distribution, where we’ve built specialized expertise in industry-specific challenges like freight charge disputes, materials invoices, and contract payment terms.

Our approach prioritizes relationship preservation because today’s delinquent customer might be tomorrow’s strong account once cash flow improves. Our collectors use respectful, professional communication to recover funds while strengthening business relationships.

Learn More About Southwest Recovery Services →

Frequently Asked Questions (FAQs)

What percentage do most collection agencies charge for commercial debts?

Most commercial debt collection agencies may charge contingency fees ranging from 15% to 25% of the amount successfully recovered. The exact percentage depends on factors including the age of the debt, its size, the volume of accounts you’re placing, and the complexity of the case. 

Newer debts typically fall at the lower end, while older accounts may reach the higher end. This contingency model means you pay nothing unless the agency successfully recovers your funds.

Are there any upfront costs when hiring a debt collection agency?

Reputable commercial collection agencies like Southwest Recovery Services (SWRS) operate on a pure contingency basis with no upfront costs, monthly fees, or retainers. You pay only when the agency successfully collects money on your behalf. 

However, if collection efforts escalate to legal action, such as filing a lawsuit, there may be additional court costs and legal fees that you’ll need to discuss with the agency before proceeding.

How do collection agency costs compare to handling collections internally?

While paying a 15–25% contingency fee may seem significant, internal collection efforts carry hidden costs, including staff salaries, lost productivity, and potential legal compliance risks. 

Professional agencies bring specialized expertise and technology systems that typically result in higher recovery rates. When you calculate the true cost of internal collections against the net recovery from a professional agency, outsourcing often proves more cost-effective.

Do I have to pay the collection agency if they don’t recover anything?

No. Under the contingency fee model that most reputable commercial collection agencies like SWRS use, you pay nothing if the agency doesn’t successfully recover any funds.

The agency only earns when you do, which aligns their incentives directly with your success. This makes professional collection services completely risk-free from a cost perspective.

Why do smaller debts cost more to collect?

Collection effort doesn’t scale proportionally with debt size. Recovering a $500 invoice often requires the same number of calls, letters, and research as recovering a $5,000 invoice. 

Since agencies invest similar resources regardless of amount, they typically charge higher percentage rates for smaller balances to maintain profitability.

*Note: Recovery rates mentioned are for general reference only and not guaranteed. Actual results vary by account and industry. Contact Southwest Recovery Services for a customized quote.