Collection agency for small business or collecting yourself: what each costs
Reviewed in October 2026
A collection agency recovers overdue invoices on behalf of another business. Most agencies charge a percentage of what they recover, set in the contract. A law firm takes the cases that need a court. The third path is the business itself, with reminders that start before the due date. Each path fits a different age of debt.
The options, side by side
| Type | Best for | Price | |
|---|---|---|---|
| Collection agency | Third party that collects in your name | Old balances the business has stopped chasing | A percentage of what it recovers, set by contract |
| Commercial collection law firm | Demand letters and court claims | Large or disputed debts, or debts with a guarantee | Legal fees agreed with the firm |
| Invoice factoring company | Buys or advances against your invoices | Businesses that need the cash before the customer pays | A discount on each invoice it funds |
| Spreadsheet and manual messages | Collections done by your own team | Businesses with a handful of customers a month | Your team's time |
| Makatea | The business's own reminders on WhatsApp and email | Businesses that bill dozens or hundreds of customers every month | From US$119 a month, no commission |
Details checked on 2026-10-16
Collection agency and Makatea side by side
| Collection agency | Makatea | |
|---|---|---|
| How it charges | A share of what it recovers | A fixed monthly plan in USD |
| Who talks to your customer | The agency | Your business, from your own WhatsApp |
| When it starts | After the invoice is already late | Before the due date |
| The customer relationship | Depends on the agency's tone | Every reminder carries your name |
| What you see | The reports the agency sends | Who paid, who promised and who has not replied |
| Contract | Per batch of accounts, with a minimum term | Month to month, cancel any time |
| Where the money goes | It may pass through the agency first | Straight to your account |
The two are not rivals for the same invoice. An agency works on debt that is already old. Makatea works so fewer invoices get there.
What a collection agency charges
Agency fees are a percentage of the money recovered. The rate rises with the age of the debt and falls with the size of the portfolio.
There is no official price list for collection agencies. Ask for the proposal in writing with these answers.
- The percentage and the amount it applies to.
- Whether the rate changes by how late the account is.
- Any setup fee, monthly fee or charge per letter.
- Who pays court costs if a case goes to court.
- How many days it takes for recovered money to reach you.
- What you owe if the customer pays you directly.
The last question matters most. Many contracts charge the fee even when the customer pays the business and not the agency.
An example with numbers
A wholesale supplier bills 220 trade customers each month. Forty invoices of US$900 are past due. That is US$36,000 outstanding.
With an agency the cost is its percentage on what it recovers. At 20%, recovering everything would cost US$7,200.
With Makatea the Essential plan costs US$119 a month for up to 500 members. The price stays the same whatever the supplier collects.
| Agency at 20% (example) | Makatea Essential | |
|---|---|---|
| US$36,000 recovered | US$7,200 | US$119 |
| US$72,000 recovered | US$14,400 | US$119 |
| Starts working | After the invoice is late | 3 days before the due date |
The 20% is only a worked example, not a market price. Use the rate from the proposal you receive.
Which path fits each stage of a late invoice
| How late | What usually happens | Path that fits |
|---|---|---|
| Before the due date | The customer has not thought about it yet | A reminder from the business |
| 0 to 30 days | Most forgot or are a few days behind | A message on the day and 3 days later |
| 31 to 90 days | The customer needs a plan | A new date or instalments by message |
| Over 90 days | The balance needs a formal step | A final demand letter and a written agreement |
| Disputed | The customer contests the invoice or the contract | A lawyer or a collection agency |
The earlier the first reminder goes out, the fewer accounts reach 90 days. Most of a portfolio is settled in the first two rows.
Agencies earn their fee on the last two rows. That is the debt a business has already stopped chasing.
How to choose a collection agency
- Ask for its message and letter templates. In the US the FDCPA bans false or misleading statements, 15 U.S.C. 1692e.
- Ask when it contacts debtors. The FDCPA treats 8 a.m. to 9 p.m. local time as convenient, 15 U.S.C. 1692c(a).
- Ask how it handles disputes. A debtor who disputes in writing within 30 days gets verification first, 15 U.S.C. 1692g.
- Check its licence or registration. Many US states and countries such as South Africa require one.
- Read the minimum term and the fee to take accounts back.
- Ask for a sample of the report you will receive each month.
The agency speaks to your customer in your name. An aggressive call becomes your problem too, and so does a lost customer.
What changes when the business collects its own invoices
Laws on debt collectors mostly cover third parties. In the US the FDCPA defines a debt collector as someone collecting debts owed to another, 15 U.S.C. 1692a.
A business reminding its own customers under its own name is in a different position. Fair practice still applies to every message.
- Messages in daytime hours, local to the customer.
- The invoice number, amount and due date in every reminder.
- No contact with family, neighbours or the customer's other clients.
- A clear way to reply, ask for a new date or dispute the charge.
- No threats of action the business does not plan to take.
Makatea sends each reminder in daytime hours with the invoice details. It stops on its own when the customer pays or promises a date.
Who Makatea is the best option for
- Businesses that bill the same customers every month, such as schools, gyms, clubs, distributors and property managers.
- Teams that send reminders by hand and lose a day each week to it.
- Businesses whose customers already reply on WhatsApp faster than to email.
- Owners who want to collect before the balance gets old, not after.
- Anyone who wants to keep the customer after the invoice is paid.
Makatea sends the reminder 3 days before the due date, on the day and after it. Each customer gets the payment link of your own processor. Makatea records promises and part payments and shows the whole portfolio in one place.
Debts that are already in dispute or in court still go to a lawyer. Makatea works on everything before that point.
How to start in one day
- Create an account and connect your WhatsApp line. The 14-day trial needs no card.
- Upload your customer list in Excel. Makatea reads the names, amounts and due dates.
- Pick the reminder sequence. Makatea sends the first messages that same day.
The trial starts with your first upload, so the 14 days run on real invoices.
Free on Makatea: proforma invoice template · promissory note template · free invoice generator
Frequently asked questions
How much does a collection agency charge a small business?
A percentage of what it recovers, set in the contract. The rate is usually higher for older and smaller debts. Ask for it in writing with any setup or monthly fees.
When should a small business use a collection agency?
When the invoice is months late and the business has stopped chasing it. Before that point, reminders from the business itself recover most invoices and keep the customer.
Is Makatea a collection agency?
No. Makatea sends the business's own reminders, under the business's name, to its own customers. It does not buy debt or collect for third parties.
Does the money pass through Makatea?
No. Customers pay through the payment link of your own processor, and the money goes straight to your account.
Can I use Makatea and a collection agency at the same time?
Yes. Makatea handles invoices before and shortly after the due date. The few accounts that end up in dispute can go to an agency or a lawyer.
How much does Makatea cost?
From US$119 a month on the Essential plan, for up to 500 members. There is no commission on what you collect, and the trial lasts 14 days with no card.
Can a small business use a collection agency?
Yes. Most agencies take accounts from small businesses on contingency, keeping a share of what they recover. Many set a minimum balance or a minimum age for each account they accept.
What does a collection agency do?
It contacts your customers who are past due, by phone, letter, email or text, and collects on your behalf. Third-party agencies in the US must follow the Fair Debt Collection Practices Act when they collect consumer debts.
How to collect a debt as a small business?
Send reminders before and on the due date, then a firm message and a final demand letter with a deadline. If that fails, choose between an agency, a lawyer or small claims court. Makatea handles the reminder steps on WhatsApp and email.
Your recurring collections on autopilot
Makatea sends the reminders over WhatsApp and email, records every payment and tells you who to follow up with first.
14 days free · No card
Keep reading
Debt collection: how it works and what the law allows
How debt collection works, what collectors may and may not do under the FDCPA, and how a business collects its own invoices fairly and on time.
Final demand letter template for unpaid invoices
Download a free final demand letter for unpaid invoices in Word, no signup. It states the amount, the deadline and the next step, with no threats.
8 payment reminder messages for every due date
Copy 8 polite payment reminder messages for WhatsApp and SMS, one for each day around the due date. Free to use, with what not to write in each one.
Payment agreement letter template in Word
Download a free payment agreement letter in Word, no signup. Set the balance, the installment dates and what happens if a payment is missed.
Accounts receivable collections that run on their own
Automate accounts receivable collections. Makatea reminds on WhatsApp and email, records payments and ranks who to follow up first. 14 days free.
Proforma invoice template
Fill in a proforma invoice online and download it as PDF or as an image for WhatsApp. What it is, what it must show and how it differs from an invoice.
Promissory note: what it is and how to write one
What a promissory note is, what it must include and how to write one, with an example. Fill in a free promissory note online and print it to sign.