Credit control process: clear steps to get paid faster

Published Tuesday 21 April 2026

Table of contents

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

Key takeaways

• Set clear payment terms in writing before any work begins, and display them on every quote, contract, and invoice to prevent disputes and give yourself a solid foundation for chasing late payments.
• Check the creditworthiness of new customers before offering credit, and ask for a deposit upfront on larger projects to protect your cash flow from the start.
• Follow a structured escalation process when invoices go overdue, starting with a friendly email reminder and gradually moving to phone calls and formal letters, so you recover payment without damaging the customer relationship.
• Automate your invoicing and payment reminders using accounting software so invoices go out the moment work is complete and follow-ups happen consistently without eating into your time.

What is credit control?

Credit control is the systematic process of managing when customers pay to ensure you get paid on time. It closes the gap between delivering goods or services and receiving payment, which directly improves your cash flow.

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 matters, but aggressive collection tactics can damage customer relationships. This is the most common reason (33%) businesses cite for not formally pursuing late payments.

Why you need a credit control policy

A policy protects your business from late payment problems that damage cash flow and costs the UK economy almost £11 billion per year. Without one, you're relying on hope rather than process.

Most small businesses start by simply issuing invoices and waiting for customers to pay. This approach creates predictable problems:

• Late payments multiply: Research shows over a third of businesses report their customers took longer to pay than contractually agreed.
• Cash flow suffers: Outstanding invoices accumulate and strain your working capital.
• Time disappears: Chasing individual payments manually eats into productive hours.

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

Essential steps in a credit control process

These steps help you get paid on time without damaging customer relationships. Follow these six steps to bring 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. 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, verify they have a history of paying on time.
3. Send clear and timely invoices. Invoice as soon as the work is done with all the information needed for payment.
4. Monitor outstanding payments. Track your accounts receivable to see who owes you money and when 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 to avoid having to write off the money completely, as 13% of businesses report doing.
6. Review and report. Track metrics like days to payment to spot issues and make improvements.

Before the sale: credit control preparation

Preparation happens before you make a sale. Taking a few steps upfront can save you significant time and stress later on.

• Run credit checks on new customers. Use a credit-checking service to review a potential customer's financial health and payment history for larger contracts.
• Agree on payment terms upfront. Have a clear conversation about payment expectations and get signed 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 to prevent unnecessary delays.
• Consider asking for a deposit. Request a portion of the payment upfront for new clients or large projects to protect your cash flow.

How to set up credit control procedures for your business

A clear setup makes your process more effective and easier for your team to follow. Here's how to get started:

1. 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.
2. Communicate payment terms clearly. Display your terms on quotes, contracts, and invoices to avoid confusion.
3. Automate your invoicing. Use accounting software to send professional invoices the moment a job is finished.
4. Set up automatic payment reminders. Schedule automated reminders before and after the due date to nudge customers.
5. Define your escalation plan. Decide what steps you'll take if an invoice becomes seriously overdue, such as phone calls, stopping services, or using a debt collection agency.
6. Make it easy for customers to pay. Offer multiple payment options like online payments or direct debit to speed up collection.

How to handle late or overdue payments

A structured escalation approach protects your cash flow without damaging customer relationships. The key is acting quickly while remaining professional.

Follow this escalation timeline:

1. Day 1 overdue: Send a friendly email reminder noting the invoice is now past due.
2. Day 7 overdue: Send a second email with the invoice attached and request confirmation of a payment date.
3. Day 14 overdue: Make a phone call to discuss the outstanding payment directly.
4. Day 21 overdue: Send a formal letter outlining the consequences of continued non-payment, such as your intent to claim statutory interest at 8% over the Bank of England base rate.
5. Day 30 or more overdue: Consider stopping further services or engaging a debt collection agency.

When you make contact, focus on finding solutions:

• Ask about issues: There may be a dispute or problem you can resolve.
• Offer payment plans: Spreading payments can help customers who are struggling.
• Confirm next steps: Get a specific commitment on when payment will be made.
• Document everything: Keep records of all communications for future reference.

The goal is to recover the money while keeping the door open for future business. Most late payments result from oversight or temporary cash flow issues rather than customers deliberately avoiding payment, although 18% of businesses believe their customers are purposefully paying late as a form of 'free finance'.

Credit control techniques you can use

These specific methods help you get paid faster without losing customers.

• Run credit checks: Assess new customers' payment history before offering credit terms to reduce risk from the start.
• Adjust payment terms: Require faster payment from new customers, as existing customers may resist changes to established arrangements.
• Tighten collection procedures: Improve your invoicing and follow-up processes for current customers to reduce days to payment.

Invoicing and payment collection mistakes to avoid

These mistakes slow down how quickly you get paid. Avoiding these nine errors can significantly improve your cash flow. The following guidance comes from Chaser, 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, and sending invoices incorrectly can delay or prevent payment entirely. For each new customer, ask these three questions:

• Payment contact: Who handles invoice payments?
• Invoice requirements: What information must appear on the invoice?
• Payment schedule: When do you run payments?

With this information at hand, you'll never waste time sending an invoice that 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 such as "Net 30 days".
• State late fee amounts and when they apply.

FAQs on credit control

Here are answers to common questions about credit control.

What's the difference between credit control and debt collection?

Credit control is the proactive process of managing customer credit and payments before they become overdue. Debt collection focuses on recovering payments that are already significantly late or in default. Credit control aims to prevent the need for debt collection.

How long should I give customers to pay?

Standard payment terms are 30 days, which over half of UK businesses with commercial customers use. However, you can adjust terms based on your cash flow needs, industry standards, and customer relationships. New customers or larger orders may warrant shorter terms or deposits.

When should I stop offering credit to a customer?

Stop offering credit when a customer consistently pays late despite reminders, has multiple overdue invoices, or shows signs of financial difficulty. You can require payment upfront or on delivery until they demonstrate improved payment behaviour.

Can I charge interest on late payments?

Yes. Under UK law, you can charge statutory interest at 8% over the Bank of England base rate on commercial debts, plus reasonable debt recovery costs. Make sure your payment terms clearly state your late payment charges.

What's the best way to chase late payments without damaging relationships?

Start with friendly reminders that assume an oversight rather than deliberate non-payment. Escalate gradually from email to phone calls to formal letters. Focus on finding solutions like payment plans rather than making accusations. Most late payments result from cash flow issues or administrative errors, not malicious intent.