You've sent a letter of demand and the debtor hasn't paid. Now what? The two main escalation paths are a debt collection agency or a solicitor. Each has its place — but they work very differently. (For background on how long invoices typically stay unpaid before you reach this point, see average time to get paid by industry.)
Side-by-side comparison
| Factor | Debt collection agency | Solicitor (lawyer) |
|---|---|---|
| What they can do | Persistent contact, negotiation, credit reporting | Everything + sue on your behalf |
| Cost model | Commission: 15–30% of collected amount | Hourly rate, fixed fee, or contingency |
| Best for | High volume, lower-value debts (<$15k) | Higher-value debts, disputed claims, litigation |
| Timeframe | 2–8 weeks for soft cases | 4–16 weeks (longer if defended) |
| Court action | No — cannot sue | Yes — can file and represent you |
| Dispute handling | Limited | Full legal representation |
| Regulatory oversight | ASIC, ACCC guidelines | Legal Services Commissioner, strict conduct rules |
When to use a debt collection agency
Agencies are most effective when:
- The debt is relatively small (under $10,000–$15,000)
- The debtor acknowledges the debt but isn't paying
- You have a high volume of small debts to chase
- You want to preserve the business relationship and avoid court
Agencies use phone calls, letters, and increasingly SMS and email to apply pressure. Their main leverage is persistence and the threat of credit reporting. They cannot threaten legal action — only a lawyer can do that.
Commission rates of 15–30% are typical. For a $5,000 debt, that means $750–$1,500 in fees on successful collection. Whether that commission is worth it depends on the success rate — our analysis of debt recovery rates in Australia breaks down what proportion of B2B debt actually gets recovered at each escalation step.
When to use a solicitor
A solicitor (debt recovery lawyer) is the right choice when:
- The debt is over $15,000
- The debtor is disputing the claim
- You need to file in court (Statement of Claim)
- The debtor is a registered company and you want to issue a statutory demand
- You need to enforce a judgment (garnishee order, writ of levy)
- The debtor appears to be insolvent
A solicitor's letter — even before any court action — often prompts payment more quickly than an agency, because the debtor knows the next step is a lawsuit with potential cost orders against them. For when court actually becomes the right path, see letter of demand vs small claims court.
The third path: a letter of demand first
Before engaging either an agency or a lawyer, a letter of demand is the fastest, cheapest first move. It costs nothing with SydneyCollect and resolves many debts without any escalation at all.
If the letter of demand doesn't work, we route to the right option at Day 14 — either our Managed collection process or a vetted lawyer partner — based on the debt amount and type.
The economics of agency vs lawyer in the 2026 data
Our 2026 Australian Debt Collection Report models the full recovery-rate ladder in Section 8. The economics it documents are sharper than the popular "agency vs lawyer" framing typically suggests.
| Stage | Recovery rate | Timeline | Cost / commission |
|---|---|---|---|
| Internal reminders | 50–65% | 0–30 days | $0 |
| Letter of demand | 55–70% | 7–21 days | $29–$300 |
| Debt collection agency | 30–45% | 4–12 weeks | 15–30% commission |
| Solicitor | 50–70% | 2–16 weeks | $500–$2,500 fixed or hourly |
| Small claims court | 50–65% (actual recovery) | 8–26 weeks | $200–$1,500 filing |
Source: 2026 Australian Debt Collection Report, Section 8. Recovery rates at each stage are conditional — they apply to debts where the previous stage failed.
Two implications follow from the data. First, the gap between agency and solicitor recovery rates is narrower than commonly assumed (30–45% vs 50–70%), but the gap in cost-per-recovered-dollar can be wide either way depending on the agency's commission rate and the solicitor's fee model. For debts under $10,000, agencies are typically more cost-effective; for debts over $15,000, solicitors usually are. Second, both options sit downstream of the letter of demand — which has the highest single-stage recovery rate of any step in the ladder (55–70%) at the lowest cost ($29–$300). The right strategy in almost all cases is LOD first, then route based on outcome.