Blog · October 2, 2026

Unpaid invoice collections: agencies, interest, and write-offs explained

You've sent the invoice, sent the reminders, and sent the demand letter — and the money still hasn't arrived. At that point most independent providers face three questions: should I use a collection agency, can I charge interest on the overdue amount, and when do I just write it off? This post walks through each. It's general information, not legal or tax advice.

When to send an invoice to a collection agency

A collection agency makes sense when the debt is clearly owed, clearly overdue, and your own follow-ups have gone unanswered — typically after 60–90 days. Before you hand it over:

• Send a final written demand first. State the amount, the work order or invoice number, and a firm deadline (7–10 days). Many agencies will ask for proof you demanded payment.
• Check your contract. Some platform agreements require arbitration or an internal dispute process before outside collection. Skipping a required step can void your claim.
• Compare contingency fees. Agencies commonly keep 25–50% of what they recover. On a small invoice, that can make the math not worth it — small-claims court may cost less.
• Verify the agency is licensed. Many states require collection agencies to be licensed and bonded. Check your state's licensing database before signing anything.

Keep your own complete file — the agency works from your records, and weak documentation means weak recovery.

Can you charge interest on an unpaid invoice?

Often yes, but the source of the right matters:

• Contract terms come first. If your agreement or invoice states a late fee or interest rate (for example, 1.5% per month), that term generally controls — as long as it stays under your state's usury cap.
• No contract term? State statutory rates apply. Most states set a default prejudgment interest rate for overdue debts, commonly in the 6–10% per year range. You usually can't invent your own rate after the fact.
• Usury laws cap the maximum. Charging above your state's legal maximum can make the interest unenforceable — and in some states creates penalties for you.

Practical tip: put the late-fee term in writing before the work starts. A rate you add to an invoice after a dispute begins is much harder to enforce.

When to write off an unpaid invoice

Sometimes recovery costs more than the invoice. Writing it off is a business decision, not a surrender:

• Weigh the amount against the effort. Court filing fees, agency percentages, and your hours all count. For very small invoices, a write-off is often the rational choice.
• Tax treatment. If you use accrual accounting and already counted the income, a genuinely uncollectible invoice may be deductible as a bad-debt expense. Cash-basis providers generally can't deduct income they never received. Talk to a tax professional about your situation.
• Writing it off doesn't erase the record. You can still report the non-payment to your state attorney general or add it to a group claim — the pattern matters even when one invoice isn't worth chasing alone.

How this fits the payment disputes guide

Collections, interest, and write-offs are the end of the timeline, not the start. Our payment disputes guide lays out the full order of operations: verify the invoice is truly outstanding, lock down your evidence, send a written demand, escalate through the platform's dispute process, and only then move to outside options like agencies, small claims, or a state AG complaint. The collections overview page summarizes the same three options side by side.

Next steps: work through the collections checklist, read the debt write-off guide for tax and bookkeeping details, or browse the collections FAQ.

If your unpaid invoice comes from a platform like Field Nation and you're seeing the same story from other providers, a shared record carries more weight than any single dispute. You can read about the group case or submit your claim to add your experience.