How to Send a Client to Collections: The Ultimate Guide for Freelancers

You know it’s true: chasing down payments is every freelancer’s nightmare. You’ve done the work, delivered an amazing project, sent multiple reminders, and yet…crickets from your client’s accounting department.

After weeks (or months) of waiting, you’re finally considering the nuclear option: sending your client to collections.

Trust me, I get it. In my decade-plus of working with thousands of freelancers through our blog and community, payment issues consistently rank as the #1 source of frustration in the freelance lifestyle.

While deciding to send someone to collections is never easy, sometimes it’s the only way to recover what you’re rightfully owed. Today, I’m sharing everything you need to know about this process—from when to make this tough call to exactly how to execute it without burning bridges or breaking laws.

What Does It Actually Mean to Send a Client to Collections?

Before we dive in, let’s clarify what we’re talking about. Sending a client to collections means you’re hiring a third-party debt collection agency to recover unpaid invoices on your behalf. These agencies specialize in pursuing delinquent payments that you haven’t been able to collect through normal channels.

It’s a serious step that typically happens after 90-120 days of non-payment, when all your other collection attempts have failed. And yes, it can have significant consequences for your client’s credit score and your relationship with them.

Collection agencies work on commission (usually 25-50% of what they collect) or charge a flat fee, so you’ll need to weigh whether the amount owed justifies this expense.

When Should Freelancers Consider Sending a Client to Collections?

Not every late payment warrants bringing in the collections cavalry. Here are some guidelines to help you determine if it’s time to take this serious step:

The invoice is significantly overdue

Most freelancers consider collections after an invoice has been past due for at least 90 days. If you’re still waiting for payment after three months of consistent follow-up, it might be time to escalate.

The amount justifies the effort and expense

Collections agencies typically charge 25-50% of whatever they recover. For very small amounts (under $500), the math often doesn’t work out in your favor. However, for larger invoices where you stand to lose thousands, the service becomes much more valuable.

You’ve exhausted all other options

Collections should be your last resort after you’ve tried multiple payment reminders, phone calls, payment plans, and perhaps even a formal demand letter. Only proceed when you’ve given the client every reasonable opportunity to resolve the issue.

The client has gone radio silent

If your client is completely ignoring your communications or has made it clear they don’t intend to pay, collections may be your only option for recovery.

You have proper documentation

You’ll need proof of the debt—contracts, signed agreements, invoices, email correspondence—to successfully pursue collections. Without proper documentation, collection agencies won’t be able to help you effectively.

Steps to Take Before Sending a Client to Collections

Before you bring in the professionals, here’s a step-by-step process to exhaust all other collection options:

1. Send Multiple Payment Reminders

Start with gentle reminders. Most late payments result from oversight rather than malice. A simple email saying “Just checking in on invoice #1234, which was due last week” can often resolve the issue.

If you’re tired of manually tracking and sending these reminders, tools like SolidGigs integrate with popular freelance software that can automate this process for you, sending reminders at preset intervals.

2. Make Direct Contact

If email reminders don’t work, pick up the phone. A personal conversation can uncover reasons for the delay and may lead to immediate resolution. Sometimes clients are dealing with cashflow issues themselves but are too embarrassed to admit it.

Document all phone conversations with follow-up emails that recap what was discussed. Having a paper trail is crucial if you end up needing to send the account to collections.

3. Offer a Payment Plan

For clients facing financial difficulties, offering a payment plan can be a win-win. They get more time to pay, and you start recovering at least some of what you’re owed.

Be sure to get any payment plan agreement in writing, with specific amounts and dates. This documentation will be important if you later need to escalate to collections.

4. Send a Formal Demand Letter

If friendly reminders and negotiations fail, it’s time to get more formal. A demand letter is an official written request for payment that outlines:

– The exact amount owed
– When it was originally due
– Your previous attempts to collect
– A firm deadline for payment (typically 7-14 days)
– A clear statement that failure to pay will result in the account being sent to collections

While this sounds intimidating, demand letters often work because they signal to clients that you’re serious about collecting what you’re owed. They also create an important paper trail if you need to take further action.

You can write this letter yourself—it doesn’t require a lawyer, though having one review it can add weight to your demand. Send it via certified mail so you have proof of delivery.

5. Consider Small Claims Court

Depending on the amount owed (usually up to $5,000-$10,000 depending on your state), small claims court can be a viable alternative to collections. The process is designed to be navigated without a lawyer, filing fees are reasonable, and judgment is typically rendered quickly.

However, winning a judgment doesn’t guarantee payment—you’ll still need to collect, which can involve additional steps like wage garnishment or bank levies.

How to Send a Client to Collections: A Step-by-Step Guide

If you’ve exhausted all other options and decided collections is the right move, here’s how to proceed:

1. Choose the Right Collection Agency

Not all collection agencies are created equal. Here’s what to look for:

Specialty and experience

Some agencies specialize in certain industries or debt types. Look for one with experience in freelance or B2B collections, as they’ll understand the nuances of your situation better than agencies that primarily handle consumer debt.

Reputation and compliance

Check online reviews and verify that the agency is licensed and bonded. They should comply with the Fair Debt Collection Practices Act (FDCPA) and have a professional approach that won’t damage your reputation.

Fee structure

Understand exactly how and what you’ll be charged. Most agencies work on contingency (taking a percentage of what they collect), but some charge flat fees or require minimum balances. Make sure the math works for your situation.

Recovery rate

Ask about their success rate for debts similar to yours. A good agency should be transparent about what percentage of accounts they typically recover.

Some reputable collection agencies for freelancers include:

– The Commercial Collection Corp: Specializes in B2B collections
– Alexander, Miller & Associates: Works with small businesses and freelancers
– Prestige Services, Inc: Handles smaller accounts with competitive rates
– Summit A•R: Known for their ethical “P.H.D. Philosophy” (Preserve Human Dignity)

2. Gather and Provide Documentation

The collection agency will need comprehensive documentation to effectively pursue your claim. Prepare:

– Your original contract or service agreement
– All relevant invoices
– A complete history of communications with the client
– Records of all payment attempts and reminders
– The demand letter and proof of delivery
– Any promises of payment the client made

The more thorough your documentation, the stronger your case will be. This is why using a system like SolidGigs that keeps all your client communications in one place can be invaluable when these situations arise.

3. Understand the Collection Process

Once you’ve hired an agency, here’s what typically happens:

– The agency sends a series of letters and makes phone calls to the debtor
– They may report the delinquent account to credit bureaus
– For stubborn cases, they may recommend legal action
– If they recover the debt, they’ll take their percentage and forward the remainder to you

Collections can take anywhere from a few weeks to several months. Stay in regular contact with your agency for updates.

4. Prepare for Possible Outcomes

There are several possible results when you send an account to collections:

Full recovery

Best case scenario: the client pays the full amount owed. You’ll receive the total minus the collection agency’s fee.

Partial recovery

The client may negotiate a settlement for less than the full amount. You’ll need to decide whether to accept this compromise.

No recovery

If the client truly can’t pay or has gone out of business, you may recover nothing. In this case, you might be able to write off the bad debt on your taxes (consult with a tax professional).

Legal Considerations When Sending a Client to Collections

The collections process comes with important legal considerations you should understand:

1. Contract Requirements

Your ability to collect often depends on having a solid contract. Ensure your freelance agreements clearly state:

– Payment terms and deadlines
– Late payment penalties and interest
– Your right to seek collections or legal remedies for non-payment

2. Statute of Limitations

Each state has a statute of limitations on debt collection, ranging from 3-10 years for written contracts. If you wait too long to pursue collections, you may lose your legal right to collect.

3. Fair Debt Collection Practices

While the FDCPA primarily regulates collection agencies rather than original creditors (you), understanding these rules helps ensure you’re working with a reputable agency that won’t cause legal problems.

4. Tax Implications

Unpaid invoices that prove uncollectible may qualify as “bad debt” that you can deduct on your taxes. Keep detailed records of your collection attempts to support this deduction if needed.

Pros and Cons of Sending a Client to Collections

Before making your final decision, weigh these advantages and disadvantages:

Advantages:

Professional expertise

Collection agencies have specialized skills, tools, and leverage that individual freelancers lack. They know exactly what buttons to push to maximize recovery chances.

Time savings

Pursuing collections yourself can consume enormous amounts of time and energy—resources better spent on paying clients. Outsourcing this task frees you to focus on your business.

Psychological distance

Having a third party handle collections creates emotional distance from an unpleasant situation, reducing your stress and preventing the matter from becoming personally contentious.

Credit reporting leverage

Collection agencies can report delinquent accounts to credit bureaus, a powerful incentive for clients to pay that you don’t have as an individual freelancer.

Disadvantages:

Cost

The commission structure means you’ll recover only a portion of what you’re owed—typically 50-75% after the agency takes their cut.

Damaged relationships

Sending a client to collections will almost certainly end your professional relationship and could impact your reputation in tight-knit industries.

No guarantees

Collection agencies can’t work miracles. If a client truly can’t pay or is determined not to, even professional collectors may fail to recover your money.

Potential for escalation

Some clients may respond to collection attempts with legal counterclaims, alleging defects in your work or breach of contract. Be prepared to defend your work quality if challenged.

How to Prevent Future Collection Problems

The best way to deal with collections is to avoid needing them in the first place. Here’s how I’ve seen successful freelancers prevent payment problems:

1. Improve Your Client Selection Process

The truth is, some clients are more likely to pay late or not at all. Look for these red flags during your intake process:

– Hesitation about your payment terms
– Reluctance to sign a formal contract
– Complaints about previous freelancers
– Disorganized communication during onboarding
– Requesting rush work without rush payment

Services like SolidGigs can help you find higher-quality clients who respect your profession and payment terms, reducing your risk of non-payment issues.

2. Require Deposits and Milestone Payments

Never start work without an upfront deposit—typically 30-50% of the project total. For larger projects, set up milestone payments so you’re never working too far ahead of your compensation.

As one freelancer in our community put it: “Once I started requiring 50% upfront, my payment problems dropped by 90%. The clients who balked at deposits were exactly the ones who would have caused payment headaches later.”

3. Establish Clear Payment Terms

Your contract should explicitly state:

– When payment is due (Net 15 or Net 30 is standard)
– Acceptable payment methods
– Late fees and interest charges
– Consequences for non-payment
– Your right to retain ownership until final payment

4. Use Professional Invoicing Software

Professional invoicing tools make it easier for clients to pay you and easier for you to track who owes what. Most modern invoicing platforms offer features like:

– Automatic payment reminders
– Multiple payment options
– Late fee calculation
– Professional templates
– Payment tracking

5. Develop a Systematic Collections Process

Don’t wait until you have a problem to figure out how you’ll handle it. Create a standard process for late payments:

– Day 1 past due: Friendly reminder email
– Day 7 past due: Follow-up phone call
– Day 14 past due: Formal notice with late fees applied
– Day 30 past due: Final notice before collections
– Day 45 past due: Initiate collections process

Having this system in place means you’ll never wonder “what should I do next?” when facing a non-paying client.

The Bottom Line: When It’s Time to Let Go

Sometimes, even with collection agencies involved, you won’t recover what you’re owed. At a certain point, you need to make a business decision about whether continued pursuit is worth your time and energy.

If the collection agency hasn’t made progress after 3-6 months, consider writing off the debt as a business loss, learning from the experience, and moving on. Use it as motivation to strengthen your contracts and vetting process for future clients.

Remember: every successful freelancer has dealt with non-payment at some point. What separates the thriving freelancers from the struggling ones isn’t whether they experience payment problems—it’s how they handle them when they occur and the systems they put in place to prevent them in the future.

If you’re tired of feast-or-famine cycles and want a steady stream of high-quality clients who respect your work and pay on time, check out SolidGigs. Our team hand-picks the best freelance jobs from dozens of job boards each week and delivers them straight to your inbox, so you can spend less time hunting for work and more time doing what you love.

Your Turn: Collection Success Stories?

Have you ever had to send a client to collections? What was your experience like? Share your story in the comments below—your insights could help fellow freelancers navigate this challenging situation.

One more thing...

You didn't start freelancing to spend hours every week searching through job boards. You started freelancing to do more work you enjoy! Here at SolidGigs, we want to help you spend less time hunting and more time doing work you love.

Our team of "Gig Hunters"—together with the power of A.I.—sends you high-quality leads every weekday on autopilot. You can learn more or sign up here. Happy Freelancing!

Preston Lee

Preston has worked for over 15 years as a freelancer. He works as a writer, a designer, and a developer and has been featured by Adobe, Forbes, Inc, Entrepreneur, and many more.