Credit control policy template

Why a written credit control policy pays for itself

Most late payment isn't malice — it's the absence of a system. When chasing depends on someone remembering, invoices drift, awkwardness creeps in, and good customers quietly pay you last because there's no consequence for paying late. A written policy removes the emotion: every customer is treated the same, every chase happens on schedule, and your team knows exactly what to do without asking. Cash arrives faster, and your working capital stops leaking into other people's bank accounts.

Copy the sections below into your company handbook or accounts process and adapt the numbers to your trade. This is a practical template for UK limited companies, not legal advice — have your terms reviewed if a debt becomes contentious.

1. Payment terms (set them before you trade)

State your terms in writing on every quote, order confirmation and invoice — clear terms are what make everything that follows enforceable. A workable default:

• Standard terms: payment due within 30 days of invoice date (adjust to 14 or 7 for higher-risk accounts).
• New customers: first order on pro-forma (paid before dispatch) or part-deposit until a payment history is established.
• Credit limit: each account has a set limit; orders that would breach it need sign-off before they proceed.
• Accepted methods: bank transfer preferred; card accepted; cheques discouraged.

Run a quick credit check on new trade accounts and ask for a deposit on large first orders — see how to improve cash flow for more on tightening terms.

2. The chase timeline (who does what, and when)

Make chasing automatic and dated, not discretionary. A proven sequence:

• Day −3 (before due): a friendly statement or reminder that the invoice falls due shortly. This alone collects a surprising share on time.
• Day 1 (overdue): polite email reminder with the invoice attached.
• Day 7: firmer email and a phone call — speaking to someone resolves most disputes and queries instantly.
• Day 14: formal written reminder noting your right to charge statutory interest and recovery costs.
• Day 21: final demand before escalation, with a clear deadline and consequence.

Ready-made wording for each stage is in the late payment chaser letter templates. Log every contact against the account so the history is there if it escalates.

3. Escalation and statutory interest

Once an invoice passes your final reminder, escalate on a defined path rather than letting it drift:

• Apply statutory interest: under the Late Payment of Commercial Debts (Interest) Act 1998, UK businesses can charge interest at 8% above the Bank of England base rate on overdue commercial invoices, plus a fixed recovery charge (£40, £70 or £100 depending on the debt size). State on the day-14 letter that you reserve this right; apply it on the final demand.
• Put the account on hold (see the stop-supply rule below).
• Letter before action, then a referral to a debt recovery agent or solicitor, or a claim through the small claims track for debts up to £10,000.

The statutory-interest demand wording is included in the chaser letter templates.

4. The stop-supply rule

The single most effective lever is the one most businesses are too nervous to use: stop supplying. Write it into the policy so it triggers automatically and impersonally:

• Trigger: any account with an invoice more than X days overdue (commonly 30 beyond terms), or any account over its credit limit, is placed on stop — no new orders dispatched until the balance is cleared.
• Authority: accounts apply the stop; only a director can override it, and only against a documented payment plan.
• Communication: the customer is told plainly that supply resumes on payment. No apology, no negotiation on the principle.

Because it's policy rather than a personal decision, your team can apply it without awkwardness — "I'm afraid the account's on stop until the balance is cleared, that's our standard process." A consistent stop rule trains even slow payers to treat you as a supplier who must be paid on time.

When chasing isn't the real problem

A good policy fixes most late payment, but it can't conjure cash a customer genuinely doesn't have, and it can't close a gap when your own outgoings fall due before even prompt payers settle. If tight cash flow is structural — a long gap between paying suppliers and being paid — the fix is funding the working-capital cycle, not chasing harder.

Confirm the gap with the working capital calculator and the cash runway calculator. Where it's a genuine timing mismatch, a revolving Credicorp Flex facility bridges it without a personal guarantee on the director — money to the company, repaid as your customers pay you. This template is general information, not legal or financial advice.