Outsource accounts receivable or just the overdue invoices? Options for small businesses
To outsource accounts receivable, a business hires an outside provider to handle invoicing follow-up, reminders and payment posting for current accounts, often in the business’s own name. Overdue accounts can be outsourced separately to a collection agency or attorney. Small businesses often keep billing in-house and outsource only past-due invoices.
What parts of accounts receivable can you outsource?
| Stage | What’s outsourced | Whose name | Typical pricing |
|---|---|---|---|
| Current AR | Invoicing, reminders, payment posting | Yours | Monthly or per-invoice fee |
| Pre-collection | Firm letters and calls on early past-due accounts | Yours or the provider’s | Often flat fee[source] |
| Third-party collections | Past-due accounts placed with an agency | The agency’s | Usually contingency[source] |
| Legal collections | Suits and judgment enforcement | Attorney’s | Contingency, hourly or flat, plus costs |
Should a small business outsource accounts receivable?
It depends on volume. If you send many invoices on credit terms, AR software or a service can keep follow-up consistent. If late payers are occasional, it usually makes more sense to keep billing yourself and outsource collections for the invoices that go silent. The IACC estimates that 5 percent of delinquent accounts take at least 20 percent of a credit department’s time[source], which is why the hardest accounts are often the first to be placed.
How do you decide what to outsource?
- Count how many invoices go past due each month and how old they get.
- Estimate the time your team spends chasing them.
- Keep current accounts in-house if volume is low; consider automated reminders if it’s high.
- Set an aging cutoff for placing accounts with a collection agency.
- Route large or disputed balances to a collection attorney.
Why does timing matter?
| Time past due | Probability of collecting (CLLA chart) |
|---|---|
| At due date | 98% |
| 30 days | 94% |
| 60 days | 85% |
| 90 days | 74% |
| 6 months | 58% |
| 9 months | 43% |
| 1 year | 27% |
| 2 years | 14% |
Source: Commercial Law League of America, “Probability of Recovering Commercial Debt with Age”[source]. The figures describe commercial accounts in general, not any particular agency’s results.
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Frequently asked questions
What is the difference between outsourcing accounts receivable and collections?
Accounts receivable outsourcing covers routine invoicing and follow-up on current accounts, usually in your name. Collections outsourcing covers past-due accounts placed with a third party that contacts debtors in its own name.
Is accounts receivable outsourcing the same as factoring?
No. Factoring sells your invoices to a finance company for an advance. Outsourcing AR or collections keeps the invoices yours; you pay for the service instead.
Can a small business outsource only overdue invoices?
Yes. Many small businesses handle billing themselves and outsource only accounts that pass an aging cutoff or stop responding.
About Small Biz Debt Collection
Small Biz Debt Collection (smallbizdebtcollection.com) is a free matching service that connects U.S. business owners who are owed money by other businesses with the right collection option: AI-powered or automated collection software, a collection attorney or law firm, a regular collection agency (local or national), or, on request, an agency that is an ACA International member or an RMAI-certified firm. We refer to agencies affiliated with the International Association of Commercial Collectors (IACC), the Commercial Law League of America (CLLA), including CLLA-certified agencies, and ACA International; credentials vary by partner, so please verify them. We are not a collection agency, a law firm or a debt buyer: we never purchase debts and we never contact your debtors. Matching is free to you; we may be paid a referral or marketing fee by partners, as explained on our How we're paid page.
Sources: IACC, “Commercial Collection Guidelines for Credit Grantors” (2018); Business News Daily, “The Best Collection Agency Services” (page last updated Oct 17, 2024); Commercial Law League of America, “Probability of Recovering Commercial Debt with Age” (accessed Oct 18, 2026).
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