Collections With AI — What It Chases, What Your Team Still Handles

At Bitvyas, an AI collections workflow takes over the routine chase on overdue invoices. It reads the ledger daily, sends reminders on a schedule, sorts replies and tracks promises to pay. Your team keeps disputes, payment plans, credit holds and the calls that protect a relationship. In India and the UK, it can also apply the statutory late-payment rules.

Most finance teams know who owes them money. What runs short is time to chase it consistently. This post maps the collections process — called credit control in the UK — step by step. For each step it shows where AI takes over and what should stay with a person. It is one of the eight processes in our hub post on what to automate with AI first. Collections usually passes all four of that post's tests.

What are the key facts for collections in India and the UK?

These are the legal numbers an automated chase needs to get right. All are as of 3 October 2026.

What does collections work look like when it is done by hand?

Someone runs an ageing report, often weekly, and decides who to chase. They write the emails, check the inbox for replies and try to remember who promised what. When month-end is busy, the chase stops.

Three patterns show up again and again:

• The chase is uneven. Polite customers get chased on time. Difficult ones get put off.
• Replies are lost. "We'll pay on the 15th" sits in one person's inbox. Nobody follows up on the 16th.
• Context is missing. A reminder goes out for an invoice the customer disputed two weeks ago, and the relationship takes the hit.

None of this is a skills problem. It is a volume and memory problem, which is exactly what software is good at.

What can AI chase on its own?

The repeatable middle of the process: reading the ledger, sending the right message at the right time, and recording what customers say. Here is the process step by step.

1. Read the ledger every day. It connects to your accounting system (Tally, Zoho Books, Xero, QuickBooks, Sage or an ERP) and pulls open invoices, due dates, part-payments and credit notes.
2. Decide who gets what. Rules you set decide the cadence, by customer group, amount and days overdue. Accounts on hold or in dispute are skipped automatically.
3. Write and send reminders in your tone, by email and, where the customer has opted in, WhatsApp. Each reminder attaches the invoice copy and a current statement.
4. Read the replies and sort them into "paid", "will pay on a date", "dispute", "needs a copy invoice" and "wrong contact". It sends copies and statements on its own and routes the rest to a person.
5. Track promises to pay. It logs the promised date and checks the ledger on that day. If the money has not arrived, it sends a polite follow-up.
6. Match remittances. When a payment advice arrives, it suggests which invoices the payment clears, for your accountant to approve.
7. Escalate on rules. Past a threshold you set, such as 45 days or a certain amount, it stops sending emails. It hands the account to a named person with the full history attached.

An example chase schedule

An illustrative starting schedule, not a result. Every business tunes it.

What does your team still handle?

Anything that needs judgement, negotiation or authority. AI drafts and organises, and a person decides.

• Disputes. Is the customer right about short delivery or a pricing error? That needs someone who can check and agree a credit note.
• Payment plans. Agreeing instalments is a commercial decision.
• Credit holds and stop-supply. These affect sales and operations, so a person with authority signs off.
• Claiming statutory interest or compensation. The workflow calculates it. Whether to charge it, and to whom, is a relationship call.
• Key accounts. Some customers should only ever hear from a person.
• Write-offs and legal action. Always a person, with the history the workflow has kept.

A good setup makes these handoffs fast. When an account reaches your team, the reminders sent, every reply and every promise to pay arrive with it in one view.

What changes for UK credit control?

The automated chase must quote the statutory position correctly. It must also be ready for the Commercial Payments Bill.

Statutory interest and compensation. For B2B debts, statutory interest is 8% over Bank of England Bank Rate. The reference rate is fixed for each half-year, so for July to December 2026 it is 11.75%. Fixed compensation of £40, £70 or £100 per invoice applies on top. The workflow calculates both on every overdue invoice, so your team can see the figure before deciding whether to claim it.

Worked example (illustration). An invoice for £12,000 is paid 30 days late in October 2026. Statutory interest is £12,000 × 11.75% × 30/365 = £115.89. Add the fixed compensation of £100, because the debt is £10,000 or more. The total claimable is £215.89. Many suppliers choose not to claim it, but the figure belongs in the reminder that says what could apply.

What the Bill would change. The Commercial Payments Bill [HL] was introduced on 19 May 2026. Its third reading in the Lords is scheduled for 20 October 2026. It then goes to the Commons, so it is not law yet. The government's March 2026 consultation response confirmed the main measures:

• a 60-day maximum payment term;
• statutory interest made mandatory;
• a statutory window for raising invoice disputes;
• new powers for the Small Business Commissioner.

For an automated workflow, that means two things. Due-date rules will need a 60-day cap check. Dispute handling should log the date each dispute was raised, because timing may soon matter legally.

Reporting. From financial years starting on or after 1 January 2026, large companies must include payment terms, average days to pay and the share paid within 30 days in their directors' report (SI 2025/1152). The same ledger data that drives the chase produces these figures.

Pure B2B trade debt generally falls outside the FCA's consumer-credit collection rules (CONC 7). If you collect from consumers, those rules apply and the workflow needs a different design.

What changes for collections in India?

If you are a registered micro or small enterprise, the MSMED Act gives your chase real weight. The automated workflow should apply it.

The 45-day rule. Under section 15 of the MSMED Act, a buyer must pay an MSE supplier within the agreed term, which cannot exceed 45 days. With no agreement, the limit is 15 days. Under section 16, late payment carries compound interest at three times the RBI Bank Rate with monthly rests. At the 5.50% Bank Rate in force on 3 October 2026, that is 16.5% a year. The workflow should read the rate from a setting your team updates, because it moves with RBI policy.

Worked example (illustration). ₹5,00,000 is paid one month after the appointed day. Interest is ₹5,00,000 × 16.5% ÷ 12 = ₹6,875 for that month, and it compounds monthly after that.

The buyer's tax angle. Buyers lose their deduction for amounts owed to MSEs until they actually pay, if they pay late. This is section 43B(h) of the 1961 Act, carried into section 37(2)(g) of the Income-tax Act 2025. The workflow can time a polite reminder of this before the buyer's financial year closes on 31 March.

Escalation routes. If the chase fails, MSEs can file on the MSME Samadhaan portal, which sends cases to the state facilitation council. That is a person's decision, and the workflow prepares the invoice and correspondence pack. For cash flow, TReDS lets MSEs discount invoices on corporate buyers.

Message rules. Commercial SMS in India needs a registered sender header and content template on DLT under TRAI's regulations. WhatsApp Business allows business-initiated messages only to opted-in contacts, using pre-approved templates. Set both up before the first reminder goes out.

How do you measure whether it is working?

Measure a baseline before you start, then track the same numbers monthly:

• Days sales outstanding (DSO), overall and for your 20 largest customers.
• Share of overdue invoices touched within 24 hours of falling due.
• Promises to pay kept, as a percentage.
• Average age of open disputes.
• Team hours spent on chasing, from a two-week time log before and after.

We don't publish client results without permission, so we won't quote a percentage improvement here. The baseline above is what you need to see your own.

Where should you start?

Start with one customer segment and email only. Make every template approved by a person, and keep a weekly review of what the workflow sent and what came back. Add WhatsApp, remittance matching and statutory-interest wording once the team trusts the basics.

If collections is not your most pressing process, the eight-process hub helps you choose. Reconciliation is often the next step, and the GSTR-2B reconciliation automation post shows a build in detail. Our collections use case shows how Bitvyas sets this up with the tools you already run.

Sources

• Late Payment of Commercial Debts (Rate of Interest) (No. 3) Order 2002, art. 4 — https://www.legislation.gov.uk/uksi/2002/1675/article/4
• Late Payment of Commercial Debts (Interest) Act 1998, s.5A — https://www.legislation.gov.uk/ukpga/1998/20/section/5A
• gov.uk, late commercial payments: charging interest — https://www.gov.uk/late-commercial-payments-interest-debt-recovery
• Bank of England, Monetary Policy Summary, September 2026 (Bank Rate 3.75%) — https://www.bankofengland.co.uk/monetary-policy-summary-and-minutes/2026/september-2026
• UK Parliament, Commercial Payments Bill [HL], stages — https://bills.parliament.uk/bills/4128/stages
• DBT, late payments consultation response, March 2026 — https://assets.publishing.service.gov.uk/media/69c2c7c413f1436476e443a2/late-payments-consultation-response.pdf
• Companies (Directors' Report) (Payment Reporting) Regulations 2025, SI 2025/1152 — https://www.legislation.gov.uk/uksi/2025/1152/made
• FCA Handbook, CONC 7 — https://www.handbook.fca.org.uk/handbook/CONC/7/1.html
• MSME Samadhaan (MSMED Act ss.15–24, delayed payments) — https://samadhaan.msme.gov.in/
• Reserve Bank of India, policy rates (Bank Rate 5.50%) — https://www.rbi.org.in/
• RBI, TReDS — https://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=3504
• Income-tax Act 2025, s.37(2)(g) — https://indiankanoon.org/doc/8481074/
• TRAI, TCCCPR (Second Amendment) Regulations, 12 Feb 2025 — https://trai.gov.in/sites/default/files/2025-02/Regulation_12022025.pdf
• WhatsApp Business Messaging Policy — https://whatsappbusiness.com/policy/

Related

• What to automate with AI first: 8 business processes mapped
• GSTR-2B reconciliation automation
• GSTR-3B Table 3 is locked: what to automate before your GSTR-1 goes out
• Collections use case
• Accounting firms

Statutory figures as of 3 October 2026. General information, not legal or tax advice.