Credit control process: Steps to get paid faster

Published Friday 2 January 2026

Table of contents

• What is credit control?
• Why you need a credit control policy
• Essential steps in a credit control process
• How to set up credit control procedures for your business
• Before the sale: credit control preparation
• Credit control techniques you can use
• Invoicing and payment collection mistakes to avoid
• Improve your credit control with the right tools
• FAQs on credit control processes

Key takeaways

• Establish clear payment terms upfront by specifying exact payment periods, late fee amounts, and getting signed agreements before starting work to eliminate confusion and prevent late payment excuses.
• Implement automated invoicing and payment reminder systems when you send more than 25 invoices monthly to streamline your credit control process and reduce manual administrative tasks.
• Follow a structured escalation process starting with email reminders for overdue payments, then phone calls for non-responsive customers, as 80% of unpaid invoices can be collected through email follow-up alone.
• Conduct credit checks on new customers and gather proper invoice contact details before making sales to prevent payment delays and protect your cash flow from the start.

What is credit control?

Credit control is the systematic process of managing customer payments to ensure you get paid on time. It reduces the gap between delivering goods or services and receiving payment.

The process involves:

• Setting clear payment terms before making sales
• Monitoring invoice due dates and payment status
• Following up promptly on overdue accounts
• Maintaining positive customer relationships while ensuring payment

Effective credit control balances speed with relationship management. Getting paid quickly improves cash flow.

However, aggressive collection tactics can damage customer relationships and drive business away.

Why you need a credit control policy

A credit control policy protects your business from late payment problems that damage cash flow.

Most small businesses start by simply issuing invoices and hoping customers pay on time. This approach creates problems:

• Late payments become common across your customer base, with research showing over a third of businesses report their customers took longer to pay than contractually agreed.
• Cash flow issues develop as outstanding invoices accumulate.
• Time gets wasted chasing individual payments manually.

When to implement credit control: If you send more than 25 invoices a month, set up formal credit control procedures to protect your cash flow.

Essential steps in a credit control process

A good credit control process helps you get paid on time without damaging customer relationships. It's a series of simple steps that brings structure to how you manage the money you're owed.

1. Set your credit terms. Decide who you'll offer credit to and for how long. This includes setting standard payment due dates for your invoices; research shows over half of businesses with commercial customers offer standard payment terms of 30 days.
2. Check customer creditworthiness. Before offering credit to a new customer, it's wise to do a quick check to see if they have a history of paying on time.
3. Send clear and timely invoices. Invoice your customers as soon as the work is done. Make sure your invoices are clear, accurate, and have all the information needed for payment.
4. Monitor outstanding payments. Keep a close eye on your accounts receivable to see who owes you money and when their payments are due.
5. Follow up on overdue invoices. Create a consistent process for chasing late payments, starting with gentle reminders and escalating as needed.
6. Review and report. Regularly look at how well your process is working. Tracking metrics like how long it takes to get paid can help you spot issues and make improvements.

How to set up credit control procedures for your business

Putting formal procedures in place makes your credit control process more effective and easier for your team to follow. Here's how you can get started:

• Write down your credit policy. Create a simple document that outlines your rules for payment terms, how you'll handle late payments, and any fees you might charge.
• Communicate payment terms clearly. Make sure your terms are visible on your quotes, contracts, and invoices. This avoids any confusion down the line.
• Automate your invoicing. Use accounting software to send professional invoices the moment a job is finished. This speeds up the whole process.
• Set up automatic payment reminders. Let software do the chasing for you. Automated reminders can be sent before and after the due date to gently nudge customers.
• Define your escalation plan. Decide what steps you'll take if an invoice becomes seriously overdue. This could include a phone call, stopping further services, or using a debt collection agency.
• Make it easy for customers to pay. Offer multiple payment options, like online payments or direct debit. The easier it is to pay, the faster you'll get your money.

Before the sale: credit control preparation

Good credit control starts before you even make a sale. Taking a few preparatory steps can save you a lot of time and stress later on:

• Run credit checks on new customers. For larger contracts, consider using a credit-checking service to review a potential customer's financial health and payment history.
• Agree on payment terms upfront. Have a clear conversation about payment expectations and get them to sign your terms and conditions before you begin any work.
• Get the right contact details. Ask for the name and email address of the person responsible for paying invoices. Sending your invoice to the right person from the start prevents unnecessary delays.
• Consider asking for a deposit. For new clients or large projects, asking for a portion of the payment upfront can protect your cash flow.

Credit control techniques you can use

Credit control techniques help you get paid faster without losing customers:

• Run credit checks: Assess new customers' payment history before offering credit terms.
• Adjust payment terms: Require faster payment from new customers (existing customers may resist changes).
• Tighten collection procedures: Improve your invoicing and follow-up processes for current customers.

You could still get your money faster by tightening up your invoicing and collection policies.

Invoicing and payment collection mistakes to avoid

These nine mistakes slow down payment collection for small businesses. The following guidance comes from , the highest-rated credit control app in the Xero app store.

1. Assuming all clients are the same

Every customer has different invoice processing requirements. Sending invoices incorrectly can delay or prevent payment entirely.

For each new customer, ask:

• Who do I talk to about invoices getting paid?
• What information has to go on the invoice for it to get paid?
• When do you do payment runs?

With this information at hand, you'll never waste time sending an invoice that simply can't be paid, or chasing the wrong person when it's past due.

2. Unclear payment terms

Clear payment terms prevent disputes and late payment excuses:

• Specify exact payment periods (e.g., "Net 30 days")
• State late fee amounts and when they apply
• Document terms in a conditions of sale agreement
• Get signed agreement before starting work

This eliminates confusion as a defence for late payment, which is important when some businesses report customers purposefully paying late and treating credit as a form of ‘free finance’.

3. Slow invoicing

Send invoices immediately after delivering products or services. Customers feel most positive about paying when they've just received value.

Why timing matters:

• Maximum goodwill: Customers are most receptive to payment requests immediately after delivery
• Faster payment: The sooner you invoice, the sooner you get paid
• Simple fact: Customers cannot pay invoices they haven't received

4. Rolling over

Don't accept late payment as normal business practice. Regular invoice reviews help you prioritise collection efforts:

• Identify overdue invoices by age and amount
• Prioritise high-value and severely overdue accounts
• Create action plans for each priority invoice

Speak with the customer and consider options like offering different payment methods, giving early payment incentives or changing the credit terms. You have lots of options. If your first few strategies don't work, try a different approach. Every customer and every invoice is different, so keep adjusting until you find what works.

5. Shying away from the phone

80% of unpaid invoices can be collected through email follow-up alone. Start with email communication when payments become overdue.

Escalation strategy:

• Email first: Most effective for initial overdue contact
• Phone follow-up: Use when email doesn't generate response
• Direct conversation: Harder for customers to justify delays

Customers find it harder to justify late payment when you have them on the line. And if there are issues to sort out, you can discuss them in real time instead of spending a few more days emailing back and forth.

6. Not thanking for payment

Say thanks when a customer pays, whether they were on time or not. These positive messages strengthen the relationship and actually increase the speed of future payments.

It takes practically no time to send a positive email, so work it into your credit control process. Just ensure it's sent within 24 hours of payment to keep it relevant and genuine.

7. Making (empty) threats

Some customers always pay late. If you've had enough, you might decide to charge late fees and interest, stop supplying goods or services till they pay, send out debt collectors, or take them to court.

These are serious moves and your customer may react by taking their business elsewhere; a valid concern, as research shows the top reason businesses don't pursue late payments is the fear they will damage customer relationships. Don't make threats lightly. But if you do make a threat, follow through. An empty threat gets you nowhere. The customer won't take you seriously again, and you could be stuck with late payment forever.

8. Forgetting your teammates

Late payment might be the finance team's responsibility, but others can help. Tell sales staff and account managers when their customers' accounts are overdue. They might be able to leverage their relationship to get an invoice paid. Or they might make new sales deals contingent on old invoices being settled.

9. Not using the right tools

Credit control becomes complex when you issue 25+ monthly invoices. Multiple communication channels create information management problems:

• Scattered records: Emails, phone notes, and handwritten records across different systems
• Incomplete data: Some information in CRM, other details in accounts payable
• Lost follow-ups: Missing communication history affects collection effectiveness

Centralised credit control software solves information management problems and improves collection results.

Key benefits of centralised software:

• Single system: All invoice communications and histories in one place
• Payment insights: Track customer payment patterns and behaviours
• Optimised strategies: Data-driven approach to collection timing and methods
• Time savings: Hours saved weekly on administrative tasks
• Cash flow improvement: Thousands in additional collections through better processes

Improve your credit control with the right tools

Managing credit control manually can take up a lot of your time. Using the right technology can automate repetitive tasks and give you a clearer picture of your finances, helping you get paid faster and improve your cash flow.

Online accounting software like Xero simplifies your credit control process. You can see when invoices are opened, send automatic payment reminders, and offer customers easy ways to pay online. By managing everything in one place, you can spend less time chasing payments and more time running your business. Ready to take control of your cash flow? Try Xero for free.

FAQs on credit control processes

Here are some common questions small business owners have about credit control.

What are the five Cs of credit?

The five Cs are a traditional way lenders assess risk. For a small business, they're a useful guide for deciding whether to offer credit to a customer. They are Character (the customer's reputation), Capacity (their ability to repay), Capital (their financial resources), Collateral (any assets that could secure the debt), and Conditions (the economic climate).

What's the difference between credit control and credit management?

Credit control refers to the day-to-day tasks of making sure you get paid, like sending invoices and chasing payments. Credit management is the bigger picture: it's the overall strategy and policy you create for granting credit, setting terms, and managing debt across your business.

How can I improve credit control without upsetting customers?

The key is clear and polite communication. Be upfront about your payment terms from the start. Send friendly reminders, not demanding ones. Thanking customers for their payments also helps build goodwill. Making it easy for them to pay online shows you value their time and convenience.