Summary
- The difference. Credit control software chases invoices from your own inbox so they get paid on time. A debt collection agency takes over once your chasing has failed. Jump to the difference
- What they cost. Software is a fixed monthly fee (Trove is £50). Agencies usually take 8% to 30% of what they recover, with older debts at the top of that range. Jump to costs
- When software is best. Your issue is a lack of process, not bad customers. Jump to when to use software
- When an agency is best. The customer has stopped responding and the amount is big enough to justify the fee. Jump to when to use an agency
- Ultimately, it’s best to use both. Chase with software, then hand invoices that are 60 to 90 days overdue to an agency, along with the full chase history. Jump to the handover
What’s the difference between credit control software and a debt collection agency
The short version: software prevents, an agency recovers.
Credit control software chases your invoices for you, from your own email address, on a schedule that starts before the due date. You pay a fixed monthly fee and the improved process gets most of your invoices paid on time.
A debt collection agency takes over an invoice once your own chasing has failed. It contacts the customer in its own name, sends formal demands and, if needed, starts legal action. You usually pay a percentage of whatever it recovers.
| Credit control software | Debt collection agency | |
|---|---|---|
| When it acts | Before and just after the due date | Once an invoice is seriously overdue |
| Who the customer hears from | You, from your own email address | The agency, in its name |
| Typical cost | Fixed monthly fee (Trove is £50/month) | Commission on what’s recovered, roughly 8% to 30% depending on how old the debt is, plus legal costs if it goes to court |
| Effect on the relationship | None (if the chasing stays polite) | Often ends it |
| Best at | Getting most invoices paid on time | Recovering the few invoices that are being ignored |
| Can it take legal action | No | Yes, usually through solicitors or partners |
The two aren’t really competing for the same job. The useful question is where one should stop and the other should start.
Cost of debt collection vs credit control software
Debt collection agency fees
Most commercial debt collection runs on a no win, no fee basis. The agency takes a commission on what it recovers and the rate depends on the age of the debt. Debts under 90 days old typically cost 8% to 15% to recover, debts a year or two old 20% to 30%.
Commission usually covers the agency’s own work only. Court fees, solicitor fees and enforcement costs are normally charged on top, and most agencies ask you to approve them first. For smaller invoices, some agencies and solicitors offer a fixed-fee letter before action instead, which is often better value at around £25.
Credit control software costs
Software charges a fixed monthly fee, whatever you collect. For UK small businesses, most credit control tools cost between £45 and £199 a month, and Trove starts at £50. Our credit control software guide compares ten tools on price and reviews.
What you can claim back from the customer
If the customer is a business, the Late Payment of Commercial Debts (Interest) Act 1998 lets you add a fixed recovery fee of £40, £70 or £100 to each late invoice, depending on its value. You can also charge statutory interest at 8% above the Bank of England base rate, and claim reasonable recovery costs beyond the fixed fee, which can include some of what you pay a collector. Our guide to UK late payment fees explains how to apply them, and the late payment fee calculator works out what’s owed on a specific invoice. Once you’ve worked it out, here’s how to tell the customer you’re adding a late payment fee.
When credit control software is the right choice
Software does the most good in the situations most businesses are actually in:
- You send plenty of invoices, and most get paid, just late. Consistent chasing is what fixes this. Nobody needs to be threatened.
- You want to keep your customers. Reminders come from your inbox and read like you, so the relationship survives.
- Late payment is a habit, not a crisis. If customers pay at 45 days on 30-day terms, software changes the pattern. An agency can’t, because it only gets involved once the damage is done.
- Nobody has time to chase. Software keeps going whether or not someone remembers. Here’s how to handle credit control without a dedicated AR person.
- You want fewer invoices reaching agency age. The best outcome is never needing a collector at all.
Most overdue invoices don’t need more than a nudge. Across the invoices Trove has chased that were later paid, 58% were paid after the first reminder, and 80% within two. Here’s the full data on how many reminders you should send.
When a debt collection agency is the right choice
There are cases where an agency is clearly the right call:
- The customer has stopped responding. Several reminders and a final demand have gone unanswered.
- The customer won’t pay, rather than can’t or hasn’t yet. They’ve received the invoice, they don’t dispute it, and they still aren’t paying.
- The amount justifies the fee. Placing a single invoice with an agency usually only makes sense above roughly £1,500 to £2,000. Below that, a fixed-fee letter before action is often the better option.
- You need legal action. Agencies can issue letters before action, start court claims and use enforcement. Software can’t.
- The customer is abroad. International debt collection agencies know local rules, courts and languages, which makes cross-border recovery far more realistic than chasing it yourself.
One situation where an agency is the wrong answer: a disputed invoice. If the customer says the work wasn’t done properly or the invoice is wrong, resolve that first. Sending a genuine dispute to a collector damages the relationship and often recovers nothing, because the customer has a reason not to pay.
The best of both: hand invoices over for debt recovery when chasing stops working
The most robust setup uses both. Software handles the majority of invoices that only need reminding, and you escalate the few that need pressure or the courts to a debt collection agency. You only pay commission on the invoices that really need it.
When to escalate an invoice to a debt collector
There’s no legal rule for when to hand an invoice over, but these are the signs it’s time:
- It’s 60 to 90 days overdue and your full reminder sequence has run.
- A final demand, with a deadline and a warning that the invoice will be passed on, has gone unanswered.
- The customer isn’t on an agreed payment plan. If a plan is realistic, it’s usually worth offering first. Our payment plans guide covers how to set one up, and when to offer a payment plan covers whether you should.
- The customer is still trading. Check Companies House first. If they’re in administration or liquidation, an agency can’t help, and you’ll need to submit a claim to the insolvency practitioner instead.
The steps before a debt collection agency
Escalation works best in order, with each step giving the customer one more chance to pay:
- Automated reminders, before and after the due date
- A final reminder from a named person with a firm deadline
- A letter before action
- A debt collection agency, or a court claim
A letter before action is the formal warning before court. It sets out what’s owed and gives the customer time to reply. Between two businesses, the courts’ pre-action rules treat 14 days as reasonable in a straightforward case. If the customer is a sole trader or an individual, the Pre-Action Protocol for Debt Claims applies instead, and you have to wait at least 30 days. For anything complex or high value, check with a solicitor. Here’s what a letter before action costs and what happens next.
If it goes to court, claims of up to £10,000 usually go through the small claims track, and you can start a claim online through GOV.UK. Court fees depend on the amount. For example, a claim between £5,000.01 and £10,000 costs £455 to issue.
What to give the debt collection agency
The better the handover, the faster and cheaper the recovery. Send the agency:
- A copy of the invoice and any purchase order
- Your terms and payment terms, including anything the customer signed
- The full chase history: every reminder, when it was sent and who it went to
- Any replies from the customer, promises to pay and notes from phone calls
- The customer’s registered company name, company number and contact details
This is where Trove helps. You can export an invoice’s full chase history from Trove and hand it straight to your debt collector: every reminder, the date it went out and who received it. The agency has the evidence it needs from day one, and it’s a clear record that the customer had every chance to pay.
Once an invoice is with an agency, stop your own reminders on it, so the customer isn’t hearing from two places at once.
Frequently asked questions
When should I send an invoice to debt collection? Once it’s 60 to 90 days overdue, your reminders and a final demand have gone unanswered, and the invoice isn’t disputed. Check the customer is still trading first, and consider whether a payment plan would get you paid sooner.
How much do debt collection agencies charge in the UK? Usually a commission of roughly 8% to 25% of what they recover, depending mainly on how old the debt is. Many work on a no win, no fee basis. Court, solicitor and enforcement costs are normally charged on top if the debt goes to court.
Can I charge the customer for debt collection costs? For business-to-business invoices, yes, within limits. The Late Payment Act lets you add a fixed £40, £70 or £100 fee per invoice, plus statutory interest and reasonable recovery costs beyond the fixed fee. Our guide to UK late payment fees covers the details.
How many reminders should I send before using a debt collector? More than most people think. Two reminders recover 80% of the invoices that get paid, but Trove has seen invoices paid after as many as 15. For anything of real value, run a sequence of five or more reminders and a final demand before escalating. Here’s the data on how many reminders to send.
Does using a debt collector damage the customer relationship? Usually, yes. A letter from a collector tells the customer you’ve given up on sorting it out between you. That’s why it belongs at the end of the process. If you want to keep the customer, a payment plan or a direct conversation is worth trying first.
Trove chases your invoices automatically from your own inbox, so fewer of them get anywhere near a debt collector. When one does, you can export the full chase history to hand over. It’s £50 a month, fixed, with a free 30-day trial. Start a free trial or book a demo if you’d like to see it first.
