You have an outstanding invoice and the payment term has long expired. The customer does not respond to your reminders and you are considering further action. The question then arises: do you hire a collection agency, or do you handle the collection process yourself? Both options have advantages and disadvantages. In this article we compare the costs, the approach and the legal aspects, so you can make an informed decision.
The good news is that for most invoices you do not need a collection agency at all. With the right approach and a correct WIK letter you can handle the collection process professionally and legally watertight yourself — at a fraction of the cost.
What does a collection agency do?
A collection agency is a company specialized in collecting outstanding debts on behalf of creditors. When you hire a collection agency, you transfer the handling of your unpaid invoice entirely or partially. The agency then takes over contact with the debtor.
The activities of a collection agency typically consist of the following steps:
- Sending a demand letter: the agency sends a demand or summons letter to the debtor on your behalf, often with a more threatening tone than your own reminders.
- Phone contact: many agencies call the debtor to pressure them into paying. This can be effective with debtors who ignore mail.
- Negotiating a payment plan: if the debtor is unable to pay the full amount at once, the agency can propose and monitor a payment arrangement.
- Initiating legal proceedings: if the debtor still does not pay after repeated attempts, the collection agency can initiate legal proceedings, whether or not in cooperation with a bailiff or lawyer.
It is important to know that a collection agency has no special legal powers. A collection agency cannot independently seize assets or garnish wages. A court order and a bailiff are always required for that. The agency essentially functions as a professional intermediary that puts pressure on the debtor on your behalf.
What does a collection agency cost?
The costs of a collection agency vary significantly, but they are almost always considerable. There are three common pricing models:
1. No cure, no pay (commission model)
The most well-known model is “no cure, no pay”. You only pay if the agency succeeds in collecting the amount. Sounds attractive, but the commission is typically 15% to 25% of the collected amount. For smaller invoices, this percentage can even rise to 30% or more.
Example: for an outstanding invoice of € 2,000, at 20% commission you pay € 400 to the collection agency. That is a substantial amount, especially when you consider that in many cases you could have saved this amount by handling the collection process yourself.
2. Fixed fee per case
Some collection agencies work with a fixed fee per collection case, for example € 50 to € 150 per claim. This model is more advantageous for higher amounts, but you pay even if the agency does not succeed in collecting the amount. Additionally, there are often additional costs for sending extra demand letters, phone attempts or legal steps.
3. Subscription model
Larger businesses can take out a subscription with a collection agency, with a fixed monthly fee for a certain number of cases. This can be cost-effective if you regularly deal with non-payers, but for most SME entrepreneurs and freelancers this is not worthwhile.
Regardless of the pricing model: the costs of a collection agency directly reduce your revenue. Although in some cases you can pass on collection costs to the debtor (in accordance with the statutory rules for collection costs), this rarely covers the full costs of the agency.
Self-collection: how does it work?
Self-collection means that you keep the entire collection process in your own hands, without the involvement of an external agency. This may sound complicated, but in practice it is a structured process that you can follow step by step.
Collecting an outstanding invoice yourself follows these steps:
- Step 1 — Send a reminder: send the debtor a friendly payment reminder ( difference reminder vs WIK letter). Often an unpaid invoice has simply been forgotten or overlooked.
- Step 2 — Send a formal demand: if the debtor does not respond to your first reminder, send a more formal demand letter with a clear new payment term.
- Step 3 — Send a WIK letter: if the debtor is a consumer, you are legally required to send a WIK letter (14-day letter) before you may charge collection costs. In this letter you give the debtor a final term of 14 days to pay. Via wikbriefversturen.nl you generate this letter automatically, legally correct, and send it directly by email — including tracking.
- Step 4 — Charge collection costs: if the 14-day term expires without payment, you may add the statutory collection costs (note the VAT rules) and statutory interest to the claim. Calculate the exact amount with our collection costs calculator.
- Step 5 — Submit the case to a collection agency: if the debtor still does not pay, you can transfer the case to a professional collection agency. Via Credifin.nl you can quickly and easily submit a collection case. Credifin takes over the entire collection process for you, including any legal steps.
In practice, the majority of debtors pay after receiving a professional WIK letter. The psychological effect of a formal, legally correct demand letter is significant — especially when the debtor sees that concrete collection costs are being announced.
Comparing advantages and disadvantages
To help you with your decision, we have listed the key advantages and disadvantages of both approaches.
Self-collection
| Advantages | Disadvantages |
|---|---|
| Much lower costs — no commission | Costs you time and attention |
| You start immediately, no waiting time | You need to know the correct steps yourself |
| You retain full control over the process | Less pressure than a letter from a collection agency |
| The customer relationship stays in your hands | Lack of legal expertise for complex cases |
| Full revenue is yours | No phone follow-up by a third party |
Hiring a collection agency
| Advantages | Disadvantages |
|---|---|
| Extra pressure on the debtor from a third party | High costs: 15-25% commission or more |
| The agency handles the work for you | Loss of control over customer contact |
| Experience with difficult debtors | Can permanently damage the customer relationship |
| Option for legal escalation | Not all agencies are reliable or effective |
| Phone and written follow-up | Minimal return on small invoices |
For most entrepreneurs with invoices up to several thousand euros, self-collection is the most sensible first step. You save the commission of the collection agency and keep control. Only when the debtor still does not pay after your own collection efforts is hiring a collection agency or bailiff a logical next step.
When to hire a collection agency?
Although self-collection is the best option in many cases, there are situations where hiring a collection agency is advisable. Consider a collection agency when:
- The debtor does not respond to anything: you have sent a payment reminder, a demand letter and a WIK letter, but the debtor does not respond in any way. In that case, the pressure of an external party can make the difference.
- It involves a high amount: for invoices of several thousand euros or more, the investment in a collection agency may be justified, especially if you do not have the time or experience with legal procedures.
- You are dealing with a notorious non-payer: some debtors are professionals at avoiding payment. A collection agency with experience in such cases knows how to best approach these debtors.
- Legal escalation is needed: if you expect the case will need to go to court, a collection agency with its own legal department can guide you through this process.
- You simply do not have the time: as an entrepreneur, your time is valuable. If you are structurally spending too much time chasing non-payers, outsourcing may be more efficient.
Important: even if you decide to hire a collection agency, you must first have taken the legally required steps yourself. A collection agency cannot claim collection costs if a correct WIK letter was not sent beforehand. Have you already sent a WIK letter via wikbriefversturen.nl and payment is still not forthcoming? Then you can submit your case directly to Credifin.nl, a professional collection agency that handles the further process for you.
Legal requirements: WIK letter first
Regardless of whether you collect yourself or hire a collection agency, there is one step that is always mandatory for consumer claims: sending a WIK letter. The Debt Collection Costs Act (Wet Incassokosten, or WIK) requires that you send the debtor a so-called 14-day letter before you may charge collection costs.
Without a correct WIK letter, the collection costs are not legally owed. This also applies if you have hired a collection agency. If the agency has not sent a WIK letter (or if the letter contains errors), a judge can reject the collection costs entirely. This is a common mistake that can cost you dearly.
The WIK letter must meet specific requirements:
- The debtor must be given at least 14 days to pay, counted from the day after receipt.
- The exact amount of collection costs that will be owed if payment is not made must be stated. Use the collection costs calculator to calculate the correct amount according to the BIK scale.
- The wording must be legally correct — the Dutch Supreme Court has issued strict rulings on this matter.
Read more about the rules surrounding collection costs in our article When can you charge collection costs?. By sending the WIK letter yourself via wikbriefversturen.nl, you can be sure it meets all legal requirements. You do not have to wait for a collection agency to arrange this for you.
Conclusion
For most small to medium invoices, self-collection is the smartest and most cost-effective approach. You save the high commission of a collection agency, you keep the customer relationship in your own hands and you can start immediately. With a professional, legally correct WIK letter you effectively put pressure on the debtor — and in many cases that is sufficient to receive payment.
Hiring a collection agency is only advisable when your own efforts remain without result, when it involves high amounts or when legal escalation is needed. But even in that case: the WIK letter must be sent first. Without this letter, collection costs cannot be recovered.
At wikbriefversturen.nl you can send a legally watertight WIK letter within minutes, complete with automatic calculation of the collection costs and email tracking. This lays the foundation for a successful collection process — without the costs of a collection agency.
Does payment not come after your WIK letter? Then you can easily submit your case to Credifin.nl. Credifin is a professional collection agency that takes over the entire collection process for you — from the first contact with the debtor to any legal proceedings. This gives you a complete process: first send a WIK letter yourself via wikbriefversturen.nl, and if payment does not come, transfer the case to Credifin.