Building a credit control policy for a small accountancy practice

For many small accountancy practices, chasing overdue invoices is an informal, inconsistent, and often uncomfortable task. It frequently falls to senior partners, whose time is far better spent on high-value client work. Without a clear process, some clients get chased aggressively while others are left for months, all based on an individual staff member's judgement. This article explains how to build a formal credit control policy that creates a consistent, professional, and effective process for getting your invoices paid on time.

A well-defined policy removes ambiguity, empowers your team, and protects your practice's most critical asset: its cash flow. It turns debt collection from an emotional, ad-hoc chore into a systematic business process.

Why Your Practice Needs a Formal Credit Control Policy

Simply wanting to "get paid faster" is the obvious driver, but the benefits of a formal policy run much deeper, strengthening the operational and financial foundations of your practice. It establishes a professional standard that benefits your team and your clients alike.

Here’s why leaving it to chance is a risk you can’t afford:

• Consistency is Professionalism: When you have a documented policy, every client receives the same level of professional communication. There are no "favourite clients" who are allowed to pay 90 days late, setting a bad precedent. A consistent process demonstrates that you are organised and serious about your payment terms, which clients respect.
• Clarity and Empowerment for Staff: A clear policy removes the guesswork for your team. A junior accountant or an admin assistant knows exactly when to send the first reminder, when to pick up the phone, and when to escalate an issue to a partner. This empowerment frees them from having to constantly ask for permission, making your practice more efficient.
• Frees Up Partner Time: The most expensive time in an accountancy practice is a partner's time. If they are spending several hours a month personally chasing aged debts, that's a significant drain on profitability. A formal policy delegates the bulk of the process to administrative staff or automated systems, allowing partners to focus on strategic growth and client service.
• Improved Cash Flow Forecasting: When your collection process is predictable, your cash flow becomes more predictable. If you know that, on average, 90% of invoices are paid within 7 days of your first reminder, you can forecast your cash position with far greater accuracy. This is vital for managing your own expenses, payroll, and investments.
• Reduces Difficult Conversations: A policy provides a neutral, objective framework for communication. When a staff member follows up, they can say, "As per our standard credit control policy, I'm calling about the invoice that is now 14 days overdue." It depersonalises the conversation, making it less confrontational and helping to preserve positive client relationships.

Key Components of a Robust Credit Control Policy

A comprehensive credit control policy is more than just a schedule of reminder emails. It's a complete framework that begins the moment you engage a new client and defines every step until the payment is in your bank account.

1. Client Onboarding and Engagement Letters

Your credit control starts before you issue the first invoice. The foundations you lay during onboarding will determine how smoothly the payment process goes later.

• Clear Payment Terms: Your engagement letter is a binding contract. It must explicitly state your payment terms (e.g., "Payment due within 14 days of the invoice date"). Don't hide it in the small print.
• Right to Charge Interest: Include a clause stating your right to charge interest and compensation on late payments under the Late Payment of Commercial Debts (Interest) Act 1998. Even if you choose not to enforce it every time, having it in your contract gives you crucial leverage.
• Right to Suspend Work: Your terms should also give you the right to suspend or cease work if invoices become significantly overdue. This is a powerful tool of last resort.
• Payment Methods: Make it easy for clients to pay you. Clearly state your accepted payment methods (e.g., bank transfer, GoCardless for Direct Debit, Stripe for card payments). Providing a direct payment link on your invoices drastically reduces friction.

2. Invoicing Procedure

An invoice that is clear, accurate, and timely is less likely to be paid late. Your policy should standardise your invoicing process.

• Accuracy: All invoices must be double-checked for the correct client legal entity, amounts, VAT calculations, and purchase order numbers if applicable. Errors give clients a legitimate reason to delay payment.
• Clarity: The description of work should be clear and relate back to the services outlined in the engagement letter. Avoid vague descriptions like "Consultancy services." Instead, use "Preparation and submission of Q2 2024 VAT return."
• Timeliness: Invoice promptly. Don't let completed work sit for weeks before raising the invoice. For recurring services like bookkeeping or payroll, invoice on a fixed, predictable schedule. For one-off projects like year-end accounts, invoice immediately upon completion and sign-off.

3. The Chasing Schedule: Your Escalation Ladder

This is the operational core of your policy. It defines the exact sequence of actions your team will take when an invoice becomes overdue. The goal is to escalate pressure gently and professionally over time.

A good schedule is consistent and leaves no room for interpretation. Below is a sample escalation timeline that you can adapt for your practice.

Timing	Action	Channel	Tone	Key Message
Day -3	Pre-emptive Reminder	Email	Friendly, helpful	"Just a friendly reminder that invoice #123 is due for payment in 3 days. You can pay online here."
Day +2	First Reminder	Email	Polite, gentle	"This is just a quick note to say that invoice #123 is now slightly overdue. Could you let us know when we can expect payment?"
Day +7	Second Reminder	Email	Polite but firm	"Following up on our previous email, invoice #123 is now 7 days overdue. Please arrange for payment at your earliest convenience."
Day +14	First Phone Call	Telephone	Professional, inquisitive	"I'm calling about invoice #123. It's now 14 days overdue and I wanted to check if there was a problem with it?"
Day +21	Statement & Firmer Email	Email	Formal, serious	"Your account is now significantly overdue. Please find attached a statement. Failure to pay may result in late payment charges being applied as per our terms."
Day +30	Final Notice	Email / Letter	Very formal	"FINAL NOTICE BEFORE ACTION: Invoice #123 remains unpaid. If payment is not received within 7 days, we will apply statutory charges and consider escalation."
Day +45	Partner Review / LBA	Internal / Letter	Legal	The designated partner reviews the debt and decides whether to issue a formal Letter Before Action or pass the debt to a collection agency.

4. Applying Late Payment Charges

UK law is on your side when it comes to B2B debt. The Late Payment of Commercial Debts (Interest) Act 1998 gives you a statutory right to claim interest and a fixed compensation sum on overdue invoices, even if you didn't specify it in your contract.

Your policy must decide your practice's stance on this. Will you apply charges automatically, or will you use them as a threat to encourage payment?

• Statutory Interest: You can charge interest at 8% plus the Bank of England's base rate. For example, if the base rate is 5.25%, you can charge interest at an annual rate of 13.25%. This is calculated daily. Your policy should state when this interest starts accruing (e.g., from Day +30).
• Fixed Sum Compensation: You can also claim a one-off fixed sum to cover the cost of recovery. The amount depends on the size of the debt.

Debt Value	Compensation You Can Claim
Up to £999.99	£40
£1,000 to £9,999.99	£70
£10,000 or more	£100

A common policy is to introduce the threat of these charges at the Day +21 stage and then formally add them to the outstanding balance if the debt remains unpaid after the 'Final Notice' period.

5. Handling Disputes and Payment Plans

Not every late payment is a refusal to pay. Sometimes clients have legitimate queries or are facing genuine, temporary cash flow problems. Your policy must account for this.

For Disputes:

1. Acknowledge Immediately: As soon as a client raises a dispute, acknowledge it in writing.
2. Pause Chasing: The automated chasing process for the disputed amount must be paused immediately to prevent further communications from damaging the relationship.
3. Investigate: Escalate the issue internally to the partner or manager responsible for that client to investigate the query's validity.
4. Seek Partial Payment: If the dispute only relates to part of an invoice, politely request payment for the undisputed balance.

For Payment Plans: Your policy should define who has the authority to offer a payment plan and under what circumstances.

• Criteria: A plan might be offered to a long-standing client with a good payment history who proactively communicates their difficulties. It would be less appropriate for a new client who has been silent for 45 days.
• Formalisation: Any payment plan must be agreed in writing, specifying the amount and date of each instalment. The policy should also state that if the client defaults on the plan, the full amount becomes due immediately, and the standard chasing process resumes.

6. Escalation to Debt Collection or Legal Action

This is the final stage of the policy. It defines the point of no return.

• The Trigger: Your policy should set a clear trigger for external escalation. For example: "For undisputed debts over £600 that remain unpaid 14 days after a Letter Before Action has been sent, the case will be passed to our designated debt collection partner."
• The Process: Having a pre-vetted debt collection agency or solicitor saves time and stress when a case reaches this point. The policy should simply state that the finance administrator will prepare a file with all relevant documentation (engagement letter, invoices, communication history) and pass it to the external party.

This formal step prevents problem debts from lingering on your books for years, becoming progressively harder to collect.

Putting the Policy into Practice: Tools and Training

A policy document gathering dust on a server is useless. Implementation is everything.

First, you must train your team. Hold a meeting to walk everyone through the new policy. Explain the "why" behind it—protecting the firm's financial health—not just the "what." Role-play the Day 14 phone call so staff feel confident and prepared. Ensure everyone knows who is responsible for each step and who to escalate issues to.

Second, you must use technology to ensure consistency. Manually tracking and executing a multi-step escalation schedule for dozens or hundreds of clients is an administrative nightmare. It's exactly the kind of repetitive, rule-based work that software is built for.

Automating the email chasing part of your policy is the single biggest efficiency gain you can make. Tools like InvoiceReminder are designed for this exact purpose. It connects directly to accounting software like Xero, QuickBooks, Sage, and FreeAgent, and automatically sends the sequence of polite-then-firmer emails that you've defined in your credit control policy. This guarantees that no invoice is forgotten and that your escalation ladder is followed perfectly every time, freeing your team from the copy-paste grind of manual chasing.

Reviewing and Refining Your Policy

Your credit control policy should be a living document. The business environment and your client base will change, and your policy should adapt.

Schedule a review every six months or annually. Look at key metrics:

• Debtor Days (DSO): Is your average collection period decreasing? If not, why?
• Ageing Profile: Do you have a large bucket of debt over 60 days? This might suggest your escalation timeline is too slow or not firm enough.
• Staff Feedback: Ask the team members responsible for credit control what's working and what isn't. Are they spending too much time on a particular step? Are clients responding well to the communications?
• Client Feedback: Are you getting complaints about the process? Is it damaging relationships?

Use this data to make informed tweaks to your policy. You might find that a pre-emptive reminder 3 days before the due date has a huge impact, or that a phone call on Day 10 is more effective than on Day 14. Continuous improvement is the goal.

Frequently asked questions

Should we charge existing long-term clients late fees?

This is a commercial decision that your policy should address. Many practices choose to waive statutory charges for a good, long-term client the first time they are late, using it as an opportunity to reinforce the payment terms. Your policy could state that first-time late payments for clients of over two years' standing can have charges waived at a partner's discretion, but the right to charge them will be asserted for any future occurrences.

What are the standard payment terms for an accountancy practice?

For one-off work like year-end accounts or tax returns, 14 or 30 days are common. For recurring monthly services like payroll and bookkeeping, payment is often due on receipt of the invoice, or, even better, collected automatically via Direct Debit before or at the start of the service period.

Who in the practice should be responsible for chasing invoices?

Your policy must define this. The most efficient model is for an administrative or finance team member to own the day-to-day process (sending reminders, making initial calls). Client-facing accountants and partners should only be involved at pre-defined escalation points, such as handling a dispute or making a final relationship call to a key client before legal action is considered.

Is it worth chasing a very small overdue invoice?

Yes. Your policy should be applied consistently regardless of the invoice value. Failing to chase small invoices sends a message to your entire client base that your payment terms are flexible and optional. It also creates bad habits. Using an automated system makes chasing a £50 invoice just as cost-effective as chasing a £5,000 one, as it requires no manual effort.

Can I stop work if a client hasn't paid an invoice?

Your engagement letter should include a clause that gives you the right to suspend services for non-payment. Your credit control policy should then specify the trigger point for considering this action. For example, it might be an option after the 'Final Notice' email is sent and the client is unresponsive. It's a very effective lever but can be damaging to the relationship, so it should be used as a last resort and be approved by a partner.

How is statutory interest calculated in the UK?

For B2B invoices, statutory interest is calculated at 8% plus the current Bank of England base rate. This gives you an annual interest rate. To apply it, you calculate a daily rate and multiply that by the invoice's outstanding value and the number of days it is overdue. For example, with a 5% base rate, the annual interest is 13%. On a £1,000 overdue invoice, the daily interest would be (£1,000 * 13%) / 365 = £0.36 per day.

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If you want to implement a consistent credit control policy without the manual effort, InvoiceReminder can help. It connects to your accounting software (Xero, QuickBooks, Sage, FreeAgent) to automatically send the chasing emails you’ve defined in your schedule. It’s built for UK accountancy practices and small businesses who need to save time on credit control. The Free plan currently includes unlimited email reminders at no cost. This automation frees up your team to focus on client work, not chasing paperwork. InvoiceReminder is built by the team behind WeCovr, which has arranged over 1,000,000 insurance policies in the UK and is authorised and regulated by the Financial Conduct Authority.