Credit control checklist

Why credit control is a cash decision

Every unpaid invoice is an interest-free loan your business is making to a customer. The longer it stays out, the more working capital is tied up in your debtor book instead of in your bank account. Tight credit control is one of the highest-return activities a small finance team can do — it costs almost nothing and frees real cash.

The single metric to watch is Debtor Days (DSO — Days Sales Outstanding): the average number of days it takes to collect an invoice. Calculate it as (trade debtors ÷ annual credit sales) × 365. If your standard terms are 30 days but your DSO is 55, roughly three to four weeks of sales are sitting uncollected. Track this monthly and treat a rising trend as an early-warning signal.

Stage 1 — Onboarding a new customer

Most bad debt is avoidable at the point of sale. Run this before you extend any credit terms:

• Confirm the exact legal entity and registered number on Companies House — invoice the entity that owes you, not a trading name.
• Run a basic credit check and set a sensible credit limit for the account.
• Send written terms of business stating payment terms, late-payment interest and your right to charge it.
• Capture the correct accounts-payable contact, email and any purchase-order requirement.
• Agree the payment method up front — ideally Direct Debit or bank transfer, with card or PayPal as fallback.
• For larger orders, take a deposit or stage payment.

Stage 2 — Invoicing right, first time

A surprising share of late payment is simply invoices that are wrong, late or unclear. Tighten the basics:

• Issue the invoice the day the work completes or goods ship — not at month-end.
• Include the customer's purchase-order number if they require one (without it, many large firms won't pay).
• State a specific due date ("due 30 June"), not just "30 days".
• Show clear payment instructions — bank details, a pay-now link, your reference.
• Confirm the invoice has been received and accepted, not just sent.

See the invoice template guide for the full list of details every UK invoice should carry.

Stage 3 — The chasing timeline

Don't wait until an invoice is overdue to make contact. A polite, consistent rhythm gets you paid faster than sporadic angry emails. Adapt this schedule to your terms:

When	Action
3 days before due	Friendly reminder the invoice is due shortly
Due date	Confirm payment expected today
Due + 3 days	First chase — email plus a phone call
Due + 7 days	Firm reminder; reference your terms and interest right
Due + 14 days	Formal letter; pause further credit/orders
Due + 30 days	Final demand before escalation

Always log every contact and promise-to-pay so anyone in the team can pick up the account.

Stage 4 — Escalation and protecting cash

If the chasing timeline runs out, escalate deliberately rather than letting the debt drift:

• Apply statutory interest and compensation under the Late Payment of Commercial Debts legislation — your terms should already reserve this right.
• Put the account on stop: no further goods or work until cleared.
• Issue a Letter Before Action, then consider a small-claims route or a collections agency.

To stop late payers from squeezing your own cash flow in the meantime, two tools help. Credicorp Flex, a revolving business credit facility, gives you working-capital head-room while you collect. Or model what unlocking your debtor book early would do for cash with the invoice finance calculator. Either way, fix the leak at source — chasing beats borrowing.