Guide to Good Credit Control

Credit Control | Ceri Williams | Oxwich Accountancy


Credit Control is about making sure that your customers pay for the goods or services you've supplied, in full and on time. Without this you aren't getting the full value of the sales your making, you're putting your working capital under pressure and are paying more borrowing costs than you should.

Good credit control management involves understanding your customers, assessing their credit risk and using this information to make informed decisions about the credit terms you negotiate with them. It involves having high quality systems and processes to ensure that work is invoiced immediately and that customers are politely reminded about payments before they are due. Finally it involves effective and robust processes to chase customers for invoices as soon as they are overdue.

Not to be overlooked - good credit control also involves thanking your customers for payment as soon as possible after you've received it.

Understanding your customers

Understanding some key information about your customers lets you operate slick and effective credit control processes:

  • What are their processes for making payments? For example larger companies often make use of purchase orders and if these are still awaiting approval when the invoice is due then you'll find it difficult to be paid. Finding out all the requirements your customers have to make payment lets you provide all the information they need in advance and follow up effectively.
  • Who do you need to speak to in order to settle payment? This may not be the person who you've made the sale to, so always find out in advance of undertaking work or delivering goods. Without knowing who to speak to you waste your time and risk annoying your customer.
  • When does your customer make their payment runs? Often payments are made in batches with payments sometimes not being scheduled until the end of the month. While you have the right to expect payment as soon as the invoice is due, knowing when their payment runs happen lets you align your chasing and avoid dragging things out for another four weeks.
  • Do you have accurate business details? Verifying your data with your key customer contact and ensuring you have the right details on your invoices avoids giving your customers an excuse to delay payments. A good CRM system integrated to your invoicing system helps here by avoiding the risk of manual error.

Assessing credit risk

Paying for credit checks can be a sound investment if your customer is unknown and you can't otherwise assess their reputation. However, keep in mind that for most SME's their customers are too small for a comprehensive credit rating. The best you can expect is to find out about any legal issues such as CCJ's or previous Director disqualifications.

Have a systematic process for getting all the data you need to perform a credit check, from your key customer contact, including their consent to perform the check. Even if you've decided a credit check isn't worthwhile this leaves a useful impression with the customer.

Don't be afraid to ask for trade references - ask your potential new customer to put you in contact with some past or existing suppliers, ideally in a similar industry to you. Then follow up and ask the suppliers how long the customer was with them, what credit limit they offered and whether they ever paid late, how often this happened and how long it took them to settle up.

If you're concerned, don't be afraid to ask a potential customer to pay up front for a few sales, so that you can judge their potential for a line of credit in future.

Setting clear sales terms

Always have agreed sales terms in place before undertaking work or delivering any goods. These protect you from potential disputes and help provide legal recourse in the worst case. Be clear on:

  • The exact specification of the work you'll be doing, or the goods you'll be supplying and how long this will take.
  • The cost, when you'll invoice and when payment is due.
  • What you'll do in the event of late payment - outline your credit control process. Not only does this undermine any complaints when you start chasing, it can avoid getting into this situation in the first place by demonstrating competence.

Always make sure your customers or clients sign your sales terms before you begin work. Having the right systems in place, such as electronic signing, can help make this a smooth process; saving time and hassle on both sides.

High quality invoicing

Good invoicing can smooth the payment process and avoid the hassle of chasing payment.

  • Make it easy for your customers to pay - be clear on the methods they are able to pay you by and include all of the information they need. Having a variety of payment methods (and in particular electronic payment methods) can help lubricate things.
  • Be very clear on the date of supply, your invoice date and payment terms - so that your customer knows exactly how long they have to make payment.
  • Make sure you have all the legal information you need to provide, such as your VAT registration number, a unique identification number, your company name (or your name and business name if unincorporated), address and contact information.
  • Have a clear and unambiguous description of the goods or services you've supplied. Be sure to include unit costs and quantities where relevant and the VAT amount where applicable.
  • If your customer uses purchase orders, always be sure to include the relevant purchase order number.

It's essential that you issue your invoices as soon as possible, and that details are accurate. Good systems can help make things more efficient, accurate and timely.

Following up before invoices are due

Following up on your sale, before the invoice becomes due, is an important step in your credit control process if you're offering credit terms longer than 14 days. You shouldn't rely on your customers having slick processes in how they manage supplier payments. A polite reminder about the invoice, a week before it's due, can do wonders in ensuring you receive payment on time (or ahead of time) and avoid the time, hassle and impact on relationships by having to chase payment. Even better if this reminder is integrated into your after sales process (such as getting customer feedback).

Chasing overdue invoices


Following up by e-mail, as soon as an invoice becomes overdue, should be your first step in chasing payment. Make things as easy as possible for your customer. In the subject line be clear on your business name and invoice number. In the body of the e-mail include the amount owed, the due date and the number of days overdue. Always attach the original invoice, so that your customer doesn't need to spend time finding it and to avoid them claiming they didn't receive it.

E-mail tone

It's important to balance the need to get payment with ongoing customer relationships. E-mails chasing payments that are only just overdue (e.g. < 3 weeks) should have a different tone from chasing payments 3 - 5 weeks overdue, and you should use a markedly different tone after 5 weeks.

You should also tailor your approach depending on your customer.

  • Highly credit worthy customers who normally pay on time need a lighter tone, phrased more as a nudge, inquiry or request for update. Don't consider escalation until 4 weeks post due, or three attempts at chasing.
  • Use a different approach from those who are credit worthy (and always pay up eventually) but are normally late and unresponsive. Consider escalating your tone sooner (after two weeks), becoming firm, clinical and to-the-point.
  • Likewise you need to take a different approach for customers who have always been reliable in paying on time, but where you know business isn't going well and they are becoming a credit risk. You need to balance your credit risk against the likelihood that they turn things around and become star customers again.
  • Your worst customers (commonly pay late, and have poor credit worthiness) probably need a firm approach from the start, and even that you require payment upfront on new sales until their balance is cleared.
E-mail frequency

You should chase overdue invoices at least fortnightly. Chasing more frequently than weekly can make your customer feel harassed and make it more difficult to get your money. The exception would be where you're still owed money after 6 chasers - by this stage your customer relations are already severely strained and chasing more than once a week is appropriate.

Also keep in mind the timing of when you chase relative to what you know about their payment run. Sending a chaser shortly before the payment run maximises your chance of getting paid.


The first step in escalation is to change who you're using to send the request. For normally good customers consider using their key contact inside your business. For normally bad customers seniority usually works better, even if this means taking it on yourself. If this doesn't work also change the recipient - chasing the person at the customer's business who has the most influence and authority. Also consider following up by phone as well as e-mail. Your last resort is a formal (posted) letter including your history of chasing and offering a final payment date before further action.

Further action

If you've done everything you can to chase payment now is the time to consider further action. All of these options will severely (probably irreparably) damage your relationship with your customer.

  • Debt collection agencies. Consider agencies that don't charge you unless they get your invoices paid (keeping in mind they'll take a greater cut for taking on this risk).
  • Late payment penalties and interest, which you are legally entitled to make.
  • Legal proceedings. Consider the total cost here. Even "no win no fee" representation can involve large court charges and a lot of your own time and energy.
Need some help or advice?

Good credit control is an essential part of getting rewarded for the value you've provided your customers and clients. The key is a disciplined and clinical approach, unfortunately this often slips due to day-to-day time pressures. That's why we include credit control services within our business packages - why not contact us to find out how we can help?