A credit control checklist for small business owners

By InvoiceReminder Editorial Team · Published 5th August 2026

Effective credit control isn't about frantically chasing down a mountain of six-month-old invoices. It's about building a system of recurring habits and checks that stops the mountain from forming in the first place. For a small business, where cash flow is everything, this isn't a 'nice-to-have'—it's a fundamental discipline for survival and growth. This article provides a comprehensive credit control checklist, breaking down the essential tasks into daily, weekly, and monthly routines to keep your accounts receivable healthy and predictable.

The Foundations: Before You Even Invoice

The best way to get paid on time is to set the stage for prompt payment before you’ve even done the work. Getting these foundational steps right will prevent a huge number of late payment issues down the line.

Know Your Customer (KYC)

In the B2B world, 'Know Your Customer' isn't just for banks. It's a crucial first step in risk management. Before you agree to offer credit (which is what any payment term other than 'payment upfront' is), you need to know who you're dealing with.

Confirm the Legal Entity: Are you working for "Dave's Decorating" or "David Smith Interiors Ltd"? Get the full, correct legal name of the business you are invoicing. This is vital if you ever need to take legal action.
Identify the Payment Contact: Don't just send invoices to your day-to-day contact. Ask them: "Who is the best person in your accounts department to send invoices to, and can I get their direct email address?" A generic accounts@ inbox can be a black hole; a named contact is accountable.
Run a Basic Credit Check: For larger new projects, consider a simple credit check using a service like Creditsafe or Experian. This can reveal a history of late payments, County Court Judgements (CCJs), or other red flags that might make you reconsider offering 30-day terms.

Agree on Clear Payment Terms Upfront

Ambiguity is the enemy of prompt payment. Your payment terms should be explicitly stated and agreed upon before any work begins.

Put it in Writing: Your quote, proposal, and terms of service should all clearly state your payment terms (e.g., "Payment due 14 days from date of invoice"). Don't leave it to guesswork.
Default Terms: Be aware that under UK law (specifically, The Late Payment of Commercial Debts Regulations 2013), if you don't agree on a payment date for B2B transactions, the law says the payment is late 30 days after either the customer gets the invoice or you deliver the goods/provide the service (whichever is later). While this provides a fallback, it's always better to set your own, clearer terms.
Consider Shorter Terms: Why offer 30 days as standard? For new clients or smaller jobs, 14 days or even 7 days is perfectly reasonable. The shorter the term, the faster the cash is in your bank. For clients with a poor payment history, insist on pro-forma payment (i.e., payment upfront).

Make Your Invoices Impossible to Misunderstand

Your invoice is the most important document in the payment process. It must be clear, professional, and contain all the information the client's accounts team needs to pay you without having to ask questions.

A compliant and clear UK invoice should always include:

The word "Invoice" clearly displayed.
A unique invoice number.
Your full company name, registered address, and contact information.
Your Company Registration Number and VAT Number (if applicable).
The client's full legal name and address.
A clear "Invoice Date" and an equally clear "Due Date".
A detailed description of the goods or services provided.
A breakdown of costs, including the subtotal, any VAT, and the final total amount due.
Your bank details for BACS transfer (Sort Code and Account Number) and the account name.

Making the due date and total amount prominent helps the person processing it to see the key information at a glance.

The Daily Credit Control Habits (5-10 Minutes)

These are quick tasks that, when done consistently, keep your finger on the pulse of your cash flow.

Reconcile Bank Transactions: Log in to your accounting software (Xero, FreeAgent, QuickBooks, Sage) and reconcile any new payments that have come into your bank account. Matching a payment to an invoice is the first and most important step. This immediately tells you who has paid and removes them from your chasing list.
Review Invoices Raised: Do a quick check of any invoices you sent out yesterday. Was it sent to the correct contact person you identified earlier? Is the amount correct? Catching a simple typo or sending an invoice to the wrong email address today saves a 30-day delay.
Acknowledge Payments (Optional but Recommended): For significant payments or new clients, a quick email saying "Hi [Client Name], just wanted to confirm we've received your payment for invoice [Number]. Many thanks!" does two things: it confirms the transaction is complete and builds a positive, professional relationship.

The Weekly Credit Control Checklist

This is your main operational session. Set aside a specific time each week (e.g., Tuesday morning) to run through this process without fail.

Generate Your Aged Debtors Report: This is your master document. An aged debtors (or aged receivables) report is a list of all your unpaid invoices, categorised by how long they’ve been outstanding. Every major accounting package can produce this in seconds. It typically looks like this:
- Current: Invoices not yet due.
- 0-30 Days: Invoices up to 30 days overdue.
- 31-60 Days: Invoices between 31 and 60 days overdue.
- 61-90 Days & 90+ Days: Seriously overdue invoices needing urgent attention.
Review the Report and Take Action: Work through your aged debtors report methodically, from least to most overdue.
- Upcoming Invoices (in 'Current'): Send a polite, automated 'due soon' reminder for any large invoices that are due in the next 7 days. This isn't a chase; it's a helpful nudge that ensures your invoice is on their payment run. A simple "Just a friendly reminder that invoice #123 is due for payment next week" is perfect.
- Just Overdue (1-7 Days Overdue): These are your top priority. The vast majority of late payments at this stage are simple oversights. A polite but clear email is required immediately.
  - Subject: Overdue Invoice Reminder: Invoice #123
  - Body: "Hi [Contact Name], I hope you're well. This is a gentle reminder that invoice #123 for £X, which was due on [Date], is now slightly overdue. Could you let me know when we can expect to receive payment? A copy of the invoice is attached for your convenience."
- Getting Older (8-30 Days Overdue): If your first email got no response, it's time to be a little firmer and pick up the phone. An email can be ignored; a phone call is harder to dismiss.
  - Email first: "Following up on my previous email, invoice #123 is now [X] days overdue. It's important we get this settled as soon as possible. Please let me know the status of this payment urgently."
  - Then call: "Hi [Contact Name], I'm calling about our overdue invoice #123. I've sent a couple of emails and just wanted to check it's been received and is scheduled for payment?" The goal of the call is to get a concrete commitment: a date and a confirmation of who is actioning it.
Automate the Repetitive Chasing: Manually drafting and tracking these weekly emails is time-consuming and easy to forget when you're busy. This is where automation becomes invaluable. Tools like InvoiceReminder integrate with your accounting software to automatically send these chasing emails based on the invoice due date. You can set up a sequence of escalating reminders (e.g., a friendly reminder at 3 days overdue, a firmer one at 10 days, and a final notice at 21 days) that runs for you in the background, freeing you up to focus on the exceptions and make the important phone calls.

The Monthly & Quarterly Reviews

Good credit control also involves stepping back to see the bigger picture. Use your monthly and quarterly reviews to analyse trends and improve your process.

Your Monthly Review

Calculate Your Debtor Days: Also known as Days Sales Outstanding (DSO), this metric tells you the average number of days it takes for your clients to pay you. A simple formula is: (Current Accounts Receivable / Total Credit Sales in Period) x Number of Days in Period. If your standard terms are 30 days but your DSO is 52, you have a systemic problem. Track this number every month. A rising DSO is an early warning sign that your cash flow is tightening.
Identify Your Problem Payers: Look at your aged debtors report. Is it the same one or two clients who are always in the 60+ day column? It might be time for a frank conversation. You may need to change their payment terms to 'upfront' or, in a worst-case scenario, decide to stop working with them.
Review Chasing Effectiveness: Are you getting responses to your emails? Is a phone call more effective? Tweak your templates and approach based on what works.

Your Quarterly Review

Assess and Write Off Bad Debts: Some invoices will, unfortunately, never be paid. If you have exhausted all reasonable chasing efforts on a debt and believe it to be unrecoverable (e.g., the company has gone into liquidation), it's time to write it off. This removes it from your accounts receivable so it doesn't distort your figures. Speak to your accountant about the correct procedure for this and how to claim VAT relief on bad debts if you are VAT-registered.
Review Your Credit Control Policy: Look at the whole system. Are your initial KYC checks working? Are your payment terms too generous compared to your industry average? Is your chasing process starting too late? Use the data from the last three months to make strategic improvements to your policy.

Dealing with Seriously Overdue Invoices: The Escalation Path

When your standard weekly process fails and an invoice becomes seriously overdue (e.g., 60+ days), you need a clear escalation path. This is about moving from reminders to formal demands.

The Right to Charge Interest and Compensation

For business-to-business (B2B) transactions, UK law is on your side. The Late Payment of Commercial Debts (Interest) Act 1998 gives you a statutory right to charge interest and a fixed compensation sum on overdue invoices, even if you didn't state it in your original terms.

Statutory Interest: You can charge interest at a rate of 8% plus the Bank of England's base rate. This is an annual rate, so you'll need to calculate it on a daily basis for the period the debt is overdue. The base rate can change, so always check the current rate on the Bank of England's website.
Fixed Sum Compensation: You can also add a one-off compensation payment to cover the cost of recovery. The amount depends on the size of the debt.

Debt Amount (per invoice)	Fixed Compensation You Can Add
Up to £999.99	£40
£1,000 to £9,999.99	£70
£10,000 or more	£100

Simply threatening to add these charges in a "Final Notice" email is often enough to prompt immediate payment. This is general guidance for B2B invoices and not legal advice; your specific contract terms may vary, and different rules can apply to consumer debts.

The Letter Before Action

If the final notice and threat of charges are ignored, the next step is a formal Letter Before Action. This is a final written warning that you will begin legal proceedings if the debt is not paid by a specific deadline (e.g., within 14 days). It should be sent via recorded delivery and must include:

The total amount outstanding, including any interest and compensation charges you have added.
A summary of the original invoice(s).
A clear statement that if payment is not made by the deadline, you will issue a claim in the County Court without further notice.

Taking Legal Action

For undisputed debts under £100,000 in England and Wales, the most common route is the government's Money Claim Online (MCOL) service. It is a relatively straightforward and low-cost way to formally claim what you are owed. However, this should always be a last resort. It takes time, costs money, and will almost certainly end the commercial relationship.

Frequently Asked Questions

How soon should I start chasing an overdue invoice?

Immediately. A polite email reminder the day after the due date is perfectly professional and often necessary. Most non-payments at this stage are simple oversights, and a quick nudge ensures you get included in the next payment run.

Is it legal to charge interest on late payments in the UK?

Yes. For business-to-business (B2B) debts, The Late Payment of Commercial Debts (Interest) Act 1998 gives you a statutory right to claim interest (at 8% over the Bank of England base rate) and a fixed compensation sum, even if it wasn't in your initial contract.

What is an aged debtors report?

An aged debtors report is a critical financial summary that lists all unpaid customer invoices and categorises them by how long they have been outstanding (e.g., 0-30 days, 31-60 days, 61+ days). It's the primary tool for prioritising your credit control efforts.

Should I stop working for a client who hasn't paid me?

This is a commercial decision, but it's often wise to pause any further work for a client with a significantly overdue balance. You can professionally inform them that their account is 'on stop' and that you'll be happy to resume work once the outstanding amount has been cleared.

What's the difference between 'accounts receivable' and 'credit control'?

'Accounts receivable' (AR) is the broad term for the entire process of managing the money owed to your business by customers. 'Credit control' is the specific, active part of AR focused on minimising risk and chasing overdue payments to ensure invoices are paid on time.

Can I automate invoice chasing?

Yes. Modern software can connect directly to accounting packages like Xero or QuickBooks to automatically send pre-written reminder emails when invoices become overdue. This automates the most time-consuming part of the process, ensuring no overdue invoice is forgotten.

Manually managing this entire checklist, especially the weekly chasing cycle, can be a significant drain on a small business owner's time. InvoiceReminder is designed to automate this repetitive part of the process. It connects to Xero, QuickBooks, Sage, and FreeAgent to send scheduled reminders for you, moving from polite nudges to firmer notices according to rules you control. This helps UK freelancers, small businesses, and accountants reduce manual chasing and get paid faster. The core email reminder features are currently available at no cost. InvoiceReminder is built by the team behind WeCovr, a UK company authorised and regulated by the Financial Conduct Authority for its insurance activities, bringing a focus on reliability and security to the software we build.