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40 politely-worded templates to get invoices paid


The ultimate guide to commercial debt collections

What is commercial debt

Commercial debt is any debt owed by a commercial venture or business. Unlike consumer debt, commercial debt is used to fund business expenses, asset acquisition and improvements. It is common for businesses to accumulate a great deal of commercial debt when first starting out.

Commercial debts are those owed by an organisation. For businesses selling on payment terms, these generally arise after an overdue invoice remains unpaid for a long period of time.


What is commercial debt collection

Commercial debt collection involves recovering unpaid invoices from a business (debtor) by a third party on behalf of another business (the creditor). Businesses specialising in debt collection are known as collection agencies, debt collectors, or debt recovery services.

Commercial debts are those owed by an organisation. For businesses selling on payment terms, these generally arise after an overdue invoice remains unpaid for a long period of time.

All businesses, regardless of size, must be able to collect their debts in order to remain solvent. When your debtors are business entities rather than consumers, it’s essential to understand the key differences between collecting commercial debt and consumer debt. For example, there are regulations that apply to consumers but not businesses entities, and there are collection strategies that are better suited to commercial accounts.

Chaser has deep expertise in the field of commercial debt collection and has developed products specifically designed for commercial debt recovery.


What is the difference between commercial and consumer debt collection

It is important to understand the difference between commercial and consumer debt collection.

Consumer debt collection agencies specialise in collecting debts owed by an individual consumer to a business. These debts include personal credit card debt, medical debt, unpaid mortgage or loan balances, etc. Extensive legislature is designed to protect consumers who owe money to businesses from unfair and unethical debt collection practices. Collection methods prohibited by this legislation include harassment, threats, or intentional deception (attempting to collect on paid debts or debts that were never owed in the first place). Other particular laws aimed at protecting consumers from overly-aggressive debt collection. In many cases, the primary form of contact between consumer collectors and debtors is mailed notices, with telephone communications or emails used as well.

The other type of debt collection is commercial collection. These debt collectors do not collect debts owned by individuals, but rather specialise in collecting debts owed by one business to another. Oftentimes, these debts are for services or products ordered from a supplier that are not paid for.

Whilst they do not need to follow the same rules as consumer debt collectors, commercial debt collection agencies still cannot use aggressive and unethical tactics. The primary tool of commercial debt collectors is telephone communication; once the business owner or department head in charge of bill payment (depending on the type of business) has been located, collectors make regular calls to try to work out a payment option that both the debtor and the creditor can agree to.

Some agencies perform both types of debt collections, but in order to receive the most effective service it is usually best to choose an agency that specialises in collecting the type of debt your company needs help with. Specialised agencies employ debt collectors who are very well trained in their debt collection efforts, and are generally more successful in collecting debts in a timely manner than agents who perform both types of debt collection.

Once a business understands the type of debt collection service they need, they should research a number of agencies in order to find the one best suited to their needs.


What is a commercial debt collector

As defined by Investopedia: “A debt collector is a company or agency that is in the business of recovering money owed on delinquent accounts. Many debt collectors are hired by companies to which money is owed by debtors, operating for a fee or for a percentage of the total amount collected. Some debt collectors are debt buyers; these companies purchase debt at a fraction of its face value and then attempt to recover the full amount of the debt.”

A debt collector may also be known as a collection agency.


When to use commercial debt collection

Having a set process in place will help your organisation avoid wasting any time deliberating over whether or not to escalate an invoice to a debt recovery agency.

We recommend considering the following, and choosing your business’ ‘stop points’ for using collections:

  • How many days overdue will payments be, or how many contact attempts will be made before you decide to escalate?
  • What is the lowest invoice value that you’re willing to escalate to the next step. Similarly, what is the highest invoice value that you’re willing to write off as bad debt?

We recommend escalation once a customer’s overdue invoice(s) reach both of the following stop points:

  • Invoices reach 30 days overdue
  • Total invoice value is £50 or higher

We’ve also outlined some red flags below. If these circumstances occur in your business, take this as a further sign that it’s time to consider escalating to a debt recovery expert:

  • You don’t have the internal resources
  • Your internal efforts haven’t paid off
  • Your customer cannot be reached
  • You’re dealing with difficult invoice disputes


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When is the right time to escalate a late payment to a commercial debt collection agency

While it might seem like escalating an unpaid invoice to a debt collector is a worst-case scenario, it’s more productive to think of it as just another tool in your credit control toolkit. As with all tools, you need to know how, and when to best use them. Escalating to a debt recovery service too early can put a strain on the relationship you have built with your customer. But, using the tool correctly, and escalating the invoice at the right time is in many cases the difference between getting the invoice paid, and writing it off as bad debt.

To help you understand when the best time to engage in debt recovery services is, we’ve put together a timeline below for effective debt recovery.


1-3 days after invoicing

If your company has provided a service or product and payment isn’t immediately forthcoming, it can be tempting to immediately reach for the big guns, especially if that unpaid invoice is crucial to your cash flow. It can be easy to embrace the worst-case scenario and assume you’re never going to get paid. However, it’s worth remembering that genuine mistakes do happen.

Once your payment deadline has passed, don’t be afraid to send a firm, but polite and still friendly, email requesting payment. Ask your client to contact your company if they are having trouble paying. Remember to attach a copy of the original invoice.


7 days after invoicing

After seven days, it’s time to apply a little more pressure. Contact your client again with a slightly more sternly worded email informing them that their payment is still outstanding. Give them a set period to make payment before you further escalate the matter. 14-days is reasonably standard.

To apply a little more gentle pressure, you can also state that, as per the Late Payment of Commercial Debts (Interest) Act of 1998, you have the right to claim late payment interest and compensation covering the “reasonable costs” incurred while recovering the debt.


21 days after invoicing

After 21 days, it’s best to deploy the personal touch. Emails are easy to ignore; phone calls are not.

Contact your client directly or escalate it to a senior member of staff. During the call, remain polite and empathetically, but stress that this is the last chance for your client to arrange for payment to prevent further escalation. For guidance, we’ve prepared 6 phone call scripts that help get invoices paid over the phone.

You have the discretion to allow more time to facilitate payment, but you are also entirely within your rights to contract debt recovery services if payment isn’t made.


More than 30 days after invoicing

More than 30-days is usually considered to be the rubicon when it comes to unpaid debt. If your client has ignored all other payment requests, it’s time to contract with a reliable debt collections agency.


Commercial debt collections and customer relationships

A key roadblock for businesses that are considering using a debt collector, is how this could impact customer relationships.

Your business spends time, money and effort building positive and profitable relationships with customers. Escalating overdue invoices to a traditional debt collections agency can put those valuable customer relationships at risk.

Traditional debt collection agencies often use aggressive, heavy-handed techniques to recover overdue funds from customers, such as excessive calling and emailing. To avoid severing valuable customer relationships for good, be mindful of this when selecting a debt collection provider. We recommend opting for a provider that will actively protect your customer relationships and industry reputation.


Digital debt collections

Digital debt collection services are the future of debt recovery. So, it is crucial that you are aware of the benefits that opting for a digital or online debt collection service can have. It involves recovering payments for overdue debts through digital channels such as email, SMS and other online tools. Benefits of digital debt collections include:

  • Customer retention: digital collections empower the debtor to self-manage payments and resolve their debts
  • Faster payments: debt collection providers that use data and insights, like Chaser Collections, can ensure debtors are always reached out to with the right message, at the best times
  • Cost savings: digital debt collection providers face lower internal operational costs, allowing them to pass on cost-savings to their users

Our article ‘Why Digital Debt Collection is the Next Big Thing’ covers the benefits of digital debt collections in more detail, and gives a comprehensive outline of 3 steps you can take to bullet-proof your receivables process.


Debt collection fees

Typically, debt collectors charge between 25% up to 50% of the amount collected (Investopedia, 2020). However, with a subscription to Chaser, invoice collection fees can be as low as 5%. Often, traditional debt collection agencies can be unclear about their pricing upfront. Unfortunately, many debt collection users find themselves faced with unexpected fees once payments have been collected.

The majority of debt collection agencies will promise a ‘no win no fee’ pricing model. However, it is worthwhile checking the fine print on this, and reading their terms and conditions. Some agencies apply this pricing model only to what is deemed as “good” debt, and will expect you to pay for anything they classify as “bad” debt, irrespective of whether it is collected or not. Additionally, some ‘no win no fee’ providers have been criticised for charging an unexpected administration charge or membership fees before they will start their process.

To avoid any unexpected charges, we recommend opting for a true no win no fee business debt recovery service that can give you a clear, transparent pricing breakdown upfront.


Debt collection compliance

Setting up your own internal debt collections system is generally not recommended, as this can be highly expensive and time-consuming for your business. You will need to hire specialists or train existing staff, without guarantee that this will be efficient or cost-effective (Credit Protection Association, 2020).

Since the development of new communications technology that can be used for collections, The Consumer Financial Protection Bureau is developing a series of updated regulations. These regulations expand on and cover gaps left in previous previous legislation. Huge impacts will be seen on the collections industry when this legislation comes into place. So, whether you choose to run collections in-house or externally, debt collection processes should always be agile and able to quickly reconfigure to the changing regulatory requirements. Opting for digital debt collection offers the flexibility to adapt approaches in line with new regulations as they are introduced.


Legal action

An alternative to recovering debts using a debt collection agency is to take legal action against your customer. Before proceeding to any form of legal action, you must first send your customer a letter of claim complying with the Pre-Action protocol, which, among other elements, must include:

  • Summary of the facts
  • What you want from the party you're claiming from
  • How you've calculated the sum you want to claim
  • Copies of key documents that you'll use to support your case
  • List of any documents you want from the other party 
  • Reasonable deadline for a response (usually 28 days)

Legal proceedings should be a last resort for collecting your overdue invoices. Taking your customers through this process can permanently damage that relationship and will make repeat business highly unlikely. 

In the case that legal action needs to be taken to get an invoice paid, be weary of providers with unclear pricing, as you don’t want to be hit with hidden and unexpected fees. Ensure your chosen legal provider, or business debt recovery service that offers legal proceedings can give you a clear, transparent pricing breakdown upfront.


Avoiding bad debts

Taking practical steps to avoid bad debts is crucial, as it will drastically reduce your business’ dependency on writing off those bad debts, and using debt collections services.

Avoiding bad debts involves the identification of non-payment risks, and the reduction of non-payment risks from customers.

Identifying non-payment risks can involve:

  • Conducting credit checks
  • Introducing discovery calls for any new customers
  • Searching online credit sites like Dun & Bradstreet
  • Checking financial history for any ‘red flags’ on Companies House
  • Speaking with your network


Steps to reduce non-payment risks can include:

  • Putting credit limits in place
  • Reviewing your payment terms
  • Requesting upfront payment of the first 2 invoices
  • Using late payment fees and interest


Chaser has a wealth of support and resources available on how to optimise your credit control process and avoid bad debts. Including The Essential Guide to Collections for Credit Controllers, covering, amongst other topics, best practise guidance on how to manage your bad payers.


Further reading:


Benefits of using a debt collection agency

While we all appreciate the difficulty that the pandemic is causing all across the business spectrum, late payment is far from a new problem.

UK SME late payment debt has now risen to a staggering £23.4 billion, nearly doubling the £13 billion owed in 2018.

The number of smaller businesses waiting on overdue payments has risen to 54%, with the average late payment burden adding up to £25,000 per company.

The impact of late payments can inflict significant damage to a smaller business. Around 35% of SMEs have had to use overdrafts to make up the late payment shortfall, and 24% have had to delay paying their own suppliers, creating a vicious cycle.

Even more worryingly, 13% of SMEs waiting on late invoices have struggled to pay their business debts, 12% have been unable to pay their staff on time, and around 10% have been forced to use invoice financing.

Not only does the late payment of invoices negatively impact SMEs, it also comes with its own costs. Chasing late payments costs SMEs around £4.4 billion per year, with 22% of businesses spending £500 or more a month on payment chasing.

Rather than asking you to spend your own valuable time and huge sums of money chasing late invoices, Chaser allows you to automate the entire process. If that isn’t enough, we also offer a new take on professional debt recovery, that puts protecting your customer relationships and reputation first.

There are a number of significant benefits associated with escalating your outstanding debt to a friendly debt collections service. The first and most important is getting your invoices paid faster.

Our collections team are industry experts who have years of experience recovering outstanding debts. Chaser’s innovative software will help you recover 80% of your outstanding invoices automatically, and our dedicated collections team is there to help you with that last 20%.

Engaging our collections team helps your business grow. Instead of ploughing hours of work and large sums of your own money into chasing outstanding payments, you can rely on our experienced team to do it for you, risk-free.

All that time and effort can then be spent on taking your business to the next level while Chaser works tirelessly until you get the money you are owed.

Compared to simply writing off bad debt, spending your own money chasing it, or paying interest on overdrafts to make up the shortfall, our collections service is remarkably cost-effective.

You’ll see an instant, no-win-no-fee quote before you escalate to us and you’ll only pay for what you use, keeping you in charge of the costs right from the beginning.

You can also rely on us to maintain a positive relationship between you and your customers at all times. Chasing bad debt yourself can be stressful and put unnecessary pressure on the business relationship between you and your clients.

Our well-trained and experienced collections team is well versed in how to best mediate these kinds of situations. We don’t employ any form of aggressive tactics. Instead, our ethically trained collectors act with compassion and professionalism.

We work as arbitrators between you and your client, working with both parties to come to a mutually agreeable resolution. Using this approach to debt collections, Chaser ensures that you can have a positive trading relationship with your clients in the future while still getting you the money you deserve.


How to choose the right debt collections agency for you

Taking practical steps to avoid bad debts is crucial, as it will drastically reduce your business’ dependency on writing off those bad debts, and using debt collections

It is critical to do your research before picking an agency.

The best debt recovery services will keep you in the loop at all times, always abide by the correct legal process, and are entirely transparent with you about all costs.

Referring an unpaid invoice to a debt collection agency isn’t a step anyone wants to take. However, with our timeline suggested here, you’ll know precisely when the appropriate time is to escalate to debt collection and have the peace of mind that you’ve already offered your client multiple other solutions.


Chaser Collections

Chaser Collections provides a considerate debt recovery service for small-medium businesses, that gets your overdue invoices paid without damaging customer relationships.

Powered by Chaser Credit Control software, Chaser Collections is the first service of its kind, combining data driven insights with invoice chasing expertise. Your customer relationships are prioritised, which leads to a higher success rate. We act as an invaluable external mediator to resolve a situation that you may have written off as hopeless. And, you have complete peace of mind throughout the whole process as all communication is logged within the Chaser software, ready for you to view.

By signing up for Chaser, you automatically have the option to use Chaser Collections - you can escalate invoices to our collections service with just three clicks! The no win no fee service is priced separately to Chaser, and all pricing can be viewed upfront within your Chaser account. To understand more about what Chaser Collections is, how it works, and why it’s the perfect solution to your overdue invoice problem, you can download your fact sheet here.

With Chaser Collections, you can expect the following:


1. Easy and simple escalation

The Chaser credit control software brings all your accounts receivable actions into one simple location.

By using Chaser you can provide your customers with flexible payment options, a Payment Portal that puts all the relevant information at your fingertips and a fully automated process that still has your business’ personal touch.

That same ease-of-use and “one application only” approach applies to our debt collection services. You can escalate an unpaid invoice to our collections team with just a few clicks within the Chaser software, saving you time so you can spend it on your business.


2. Protecting your business relationships

We know exactly how important it is for you to maintain a positive relationship with your customers. We feel the same about our customers.

That’s why, when you escalate an unpaid invoice to our collections team, you can be sure that our highest priority is maintaining the relationship between you and your customers. We work to get you the money you’re owed in an agreeable manner for both parties, without damaging your reputation.

We don’t believe that the debt collection process has to be aggressive or antagonistic. We are always working to make sure your customer has the largest number of options available to ensure the smooth and fair repayment of debts.

Using our ‘people-first’ approach, we actively work with your customers to find a solution that benefits both you and them.


3. Time saved

Time is money, especially for small businesses. Chasing late payments costs both time and money, as much as £500 a month on average. Our ground-breaking AR software makes it as simple as possible for you to chase late payments.

You can schedule payment reminders, provide your customer with all the relevant information, put payment links right in the reminder, and keep track of all your outstanding payments from one central location.

Our friendly debt collections service uses the same time-saving principles as the rest of the offerings. You pass the issue over to us and we keep you updated throughout the entire process, letting you spend your valuable time on the other parts of your business.


4. Integrated software

Because our collections services are a fully integrated part of our software, you don’t even need to give us a handover. All the information we need on your unpaid invoices is contained within our system and can be forwarded to our collections department with just a few simple clicks.


5. Full transparency

We always operate with full transparency, which is why you’ll be able to see a full record of all the interactions with your customers. By combining our collections services with our Chaser credit control software, you’ll stay informed, every step of the way.


6. Ethically trained debt collectors

Our team on the ground are consummate professionals who fully embody the idea of fair but firm collection service. All of our collections team are CICM-trained. They approach each and every collection with compassion and professionalism to get the best result for you, whilst keeping your customers happy.


7. Instant quotes and clear prices

As soon as you escalate an outstanding invoice through the Chaser software, you’ll be given an instant quote and a breakdown of what the collections will cost. With Chaser, you only pay for what you use, making us a hugely cost-effective alternative to traditional debt collection agencies.


Fact Sheet

Learn about accounts receivables automation

Download the fact sheet on accounts receivable automation for a concise view outlining the key features, benefits, and advantages of implementing an automated system for managing accounts receivable.

Download the fact sheet
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