How to Collect Debt

When collecting debts in UK and overseas you need to follow the rules of the territory that your debtor is located in

Depending on the circumstances you can collect debt with:

  • Dunning letters
  • Structured repayment plans
  • Court orders
  • Negotiations with liquidators

First steps in debt collection

Reminder calls

The moment an invoice reaches its due date and remains unpaid is the time to pick up the phone. It’s worth bearing in mind when you want to collect debt that most businesses respond well to human contact. Maybe they’ve been busy and just needed a little prompt to remind them to pay up. A friendly call is a great way to keep up a good relationship with your customer and, if they pay up, a simple way to call in the debt.

Dunning letters

Dunning letters are a series of reminder notes to prompt slow payers to settle outstanding bills. These can be issued weekly once an invoice has become overdue and can be sent out automatically via email. Alternatively you can choose to post each letter. It’s a good idea to keep a template of draft letters on standby so that you can react promptly to any overdue invoices. Dunning letters are subject to laws in individual jurisdictions that govern the level of threat they represent, so it is a good idea to seek advice about the territory your debtor is located in.

When you use Dunning letters to collect debt, you should follow a specific order. The first letter should alert your customer to the fact that an invoice is overdue. It should include the invoice number, date, due date and amount. Indeed, all of your letters should include this information.

Your second letter should remind your debtor that the invoice is still overdue. You can quote your previous correspondence and invite the debtor to settle the debt or, if you wish, to contact you to organise a payment plan. If the jurisdiction and your contract allows, you may be able to demand interest as late payment compensation.

The third letter escalates your demands and can add the ‘threat’ of passing the debt to an external debt collection agency. It usually provides a final date to pay the invoice, after which it will be passed to the debt collection agency to collect.

Your final letter provides you with the opportunity to take legal action to collect the debt.  If you’re using a professional debt collection agency, they will usually take on this role for you. If not, it is a good idea to take legal advice before pursuing this option.

Amicable debt collection

Amicable debt collection is just what it sounds like. It’s all about retaining positive relationships with your customer and working closely with them to help resolve their cash flow issues. For example, it may be that you customer just needs some extra time to settle their bill. Or they may benefit from a structured repayment plan. The key to all amicable debt collection solutions lies with communication. If your debtor is overseas it can be a good idea to work through an agency that is fluent in the local language, laws and customs to ensure a favourable outcome.

If you have a trade credit insurance policy any payment plans may need approval from your insurer so check your policy terms and conditions first.

Taking legal action to collect debts

If your customer ignores your reminders to pay up, you may want to take legal action to recover your money. The legal steps open to you will be dependent on the circumstances of the debt and your debtor’s jurisdiction. It is a good idea to take legal advice before attempting any legal action to collect debt.

Many business debt collection agencies, such as Atradius Collections, are experienced in negotiating with liquidators and have access to legal networks including lawyers and skip trace agents, sheriffs and bailiffs.

Learn more about the services provided by Atradius Collections


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