Should You Notify Customers Before Hiring Collection Agency?

Many businesses are often unsure of what the correct steps are to do when considering hiring a collection agency.  Companies understand they probably need help to recover the money owed but have many questions on what should be the best strategy to improve the odds of getting paid.

One of the most common questions asked to a collection agency is should they notify the debtor they are intending to hire a collection agency.

They are no right or wrong answer to this question as both have advantages and disadvantages so let’s go further in depth so you can make the best decision for your business.


Higher Revenue:  It is no secret, collection agencies do not work for free.  If you collect payment from the debtor then you will get all the money rather than just a portion. By attempting to collect the debt yourself, you give your business a higher revenue ceiling.

Quick Repayment:  Your business already has a relationship with the customer.  You have the customers phone number, mailing address, ect.  You can attempt to collect the money instantly rather than entering a contract with a collection agency to represent you. The red tape of placing an account with a collection agency can slow down the process of getting repaid.

Urgency:  The urgency of notify the debtor that they have a deadline to pay before they are handed over to a collection agency can be highly motivating for the debtor.  When provided a hard deadline, a debtor has to make a decision to pay or either deal with a collection agency after that point.  The debtor has lost leverage with the business and time is not a friend of the debtor.


Legal- Debtors are protected under FDCPA, which essentially sets laws on what is allowed while collecting a debt.  If a business is attempting to collect a debt, they could possibly overstep the law and end up in hot water.   If the conversation turns heated, many will say things that cross over the line which could lead to legal issues.

Time Wasted- By waiting a few days or weeks to notify the debtor and waiting for payment after the notification then you are wasting days that a collection agency could already be working on collecting the debt.  The further past due a customer goes, the less likely a payment will be recovered.

Procrastination- Sometimes businesses know they need to hire help to collect a debt but keep putting it off because they think it will be lots of work to do.  By notify the debtor they are hiring a collection agency, it gives them a few more days to kick the can down the road before ultimately turning the debtor over to a debt collector.

How Should You Notify The Debtor?

The easiest way to notify the debtor is to simply call them and have a conversation over the phone.  Be kind and professional, keep a professional tone and do not let emotions take control of the call.

Keep the conversation straight to the point.  Let the customer know how much is owed and when you plan on turning them over a collection agency.

This isn’t to be said in a threatening manner.  Stay professional and make sure to get across clearly to the customer they have the option to pay by a certain day or a collection agency will be hired after that day.

You can also send a letter to the debtor stating the amount owed and your intentions to hire a collection agency by a certain day if they have not made payment arrangements.

Steps To Take After Notifying Debtor

Once you have notified the debtor of your intentions and the debtor either refuses or fails to pay by the deadline then you will need to move forward with hiring an agency.

The process of turning someone over to collections is simple.  All you need is a copy of the invoice and then you can place the account.  The invoice is essential because without it they are no proof the debtor owed the money.

The collection agency usually allows you to send over the account through e-mail, fax, or through the agencies website.


Notifying a customer that your business intends to turn them over to a debt collection agency is never an easy decision.  Quite frankly, most small businesses find this incredibly uncomfortable which is why they often simply write off the debt and they never attempt to collect the money.

The simple act of notifying the debtor can result in receiving a quick payment in full.  Remember to keep the conversation to the point and professional.  If the deadline passes, move ahead with hiring the collection agency and let them go to work in recovering the money your business is owed.



Is your business collecting debt from individual consumers or other businesses?

Collect from individuals consumers only
Collect from businesses only
Collect from individual consumers and businesses

Roughly how much debt are you looking to collect?

$100,000 or more

Roughly how many accounts are you looking to collect from?

100 or more

On average, how long have the accounts been past due?

Less than two months
Two to six months
Six to 12 months
One year or more

Contact Information

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Tell us where you are located