What a healthy credit control process looks like month by month

A chaotic credit control process is a silent killer of cash flow. When invoicing is ad-hoc, reminders are sent whenever you remember, and overdue debts pile up without a clear plan, your business is constantly on the back foot. The solution isn't just to chase harder; it's to implement a predictable, professional monthly rhythm that covers everything from invoicing hygiene to debt escalation. This article provides a practical, month-by-month framework that UK small businesses and freelancers can use to keep their accounts receivable healthy and predictable.

The Foundation: Get It Right Before You Invoice

Excellent credit control begins long before an invoice is due. The work you do at the start of a client relationship sets the expectation for prompt payment and gives you a stronger footing if things go wrong.

Set Crystal-Clear Payment Terms

Never assume a client knows or agrees to your payment terms. They must be explicitly stated and agreed upon before you start work.

• In Your Contract/Proposal: Your terms and conditions or letter of engagement should have a dedicated clause for payment. Specify the payment deadline (e.g., "14 days from date of invoice," "30 days end of month"). For new clients, shorter terms like 7 or 14 days are often wise. The statutory default for UK B2B transactions, if you don't specify otherwise, is 30 days.
• On Your Invoice: Reiterate the payment terms clearly on the invoice itself, along with the specific due date. Don't make the client calculate it.
• Late Payment Clause: It's good practice to include a clause stating that you reserve the right to charge interest and compensation on overdue commercial debts as per the Late Payment of Commercial Debts (Interest) Act 1998. This shows you are serious and aware of your rights.

Onboard Your Clients Properly

When you take on a new client, part of the onboarding process should be administrative.

1. Confirm the Billing Entity: Are you invoicing a limited company, a sole trader, or an individual? Get the full, correct legal name. For companies, you can verify this on the Companies House register.
2. Get the Accounts Payable Contact: Don't just send invoices to your day-to-day contact. Ask for the specific person or email address for the accounts payable department (e.g., invoices@clientcompany.co.uk). This simple step prevents your invoice from getting lost in the wrong inbox.
3. Ask About Their Payment Process: A simple question like, "Just for our records, what's your typical payment run schedule?" can be very revealing. If they only pay suppliers on the last Friday of the month, you know not to expect payment on the 15th, even if your terms are 14 days. This helps you manage your own cash flow expectations.

Week 1: Invoicing & Administrative Hygiene

The first week of the month (or the first week after a project is completed) is all about getting your invoices out the door cleanly and correctly. Delays here are self-inflicted cash flow problems.

Raise Invoices Immediately

Don't wait until the end of the month to invoice for work completed at the beginning. The sooner you send the invoice, the sooner the payment clock starts ticking. If you perform work throughout the month, decide on a consistent invoicing schedule—either per-project, weekly, or on a set day of the month. The key is consistency.

Ensure Your Invoices are Legally Compliant and Clear

A vague or incorrect invoice is a perfect excuse for a client to delay payment. Every invoice should include:

• The word "Invoice" clearly displayed.
• A unique invoice number.
• Your full company name, address, and contact information.
• Your VAT number (if you are VAT registered).
• The client's full name and address.
• A clear description of the services or goods provided.
• The date the goods or services were provided (the "supply date").
• The date of the invoice.
• The total amount payable.
• The payment terms and the exact due date.
• Your bank details for Bacs transfer (sort code and account number).

If a Purchase Order (PO) number is required by your client, make sure it is clearly displayed on the invoice. An invoice sent without a required PO number will almost certainly be rejected by their accounts department, resetting your payment timeline.

Weeks 2-3: The Quiet Period & Proactive Nudges

Your invoice is sent, and the payment term clock is ticking. For a 30-day term, this period is often quiet. However, you can use this time proactively to prevent late payment before it even happens.

The 'Due Soon' Reminder

For invoices with longer payment terms (30 days or more), sending a polite, automated reminder 3-5 days before the due date is a powerful and professional tactic. This is not a chasing email; it's a helpful nudge.

Example Wording:

Subject: Friendly Reminder: Invoice #123 is due on [Due Date]

Hi [Client Name],

Hope you're having a good week.

This is just a quick, friendly reminder that invoice #123 for £[Amount] is due for payment in a few days, on [Due Date]. A copy is attached for your convenience.

If you've already scheduled the payment, please feel free to disregard this email.

Best regards,

[Your Name]

This simple email serves several purposes:

• It pushes your invoice to the top of their inbox.
• It acts as a prompt for them to schedule the payment if they haven't already.
• It provides another copy of the invoice in case the original was lost.
• It opens a dialogue if they have a query they forgot to raise.

Week 4 & Beyond: The Chasing Cadence

This is where the active part of credit control begins. When an invoice passes its due date, you need a structured, escalating process. The tone should shift from helpful to firm over a period of weeks.

This sequence of scheduled, escalating emails is precisely what automation tools are for. Instead of manually tracking dates and sending emails, a system like InvoiceReminder can be configured to do this for you, ensuring consistency and freeing up your time.

Stage 1: The Gentle Reminder (1-7 Days Overdue)

Assume the late payment is an oversight. The tone should be polite, friendly, and non-accusatory.

• Action: Send an email reminder.
• Tone: Helpful and understanding.
• Example Wording:

Subject: Gentle Reminder: Invoice #123 is now overdue

Hi [Client Name],

This is a quick follow-up to let you know that invoice #123 for £[Amount], which was due on [Due Date], is now slightly overdue. I've attached another copy in case the original has been misplaced.

Could you please let me know when we can expect to receive payment? If you have any questions about the invoice, please don't hesitate to get in touch.

Best regards,

[Your Name]

Stage 2: The Firm Follow-Up & Phone Call (8-14 Days Overdue)

If the first email is ignored, it's time to be more direct. The assumption of a simple mistake is fading.

• Action: Send a firmer email and follow up with a phone call 24 hours later if there's no reply.
• Tone: Polite but professional and firm. No more apologies.
• Example Wording:

Subject: URGENT: Invoice #123 is now 10 days overdue

Hi [Client Name],

Following up on my previous email, invoice #123 for £[Amount] is now 10 days overdue. Payment was due on [Due Date].

Prompt payment for our services is essential for us to manage our business and was a condition of our agreement. Please arrange for immediate payment of the outstanding balance.

If there is an issue preventing payment, please contact me directly on [Your Phone Number] to discuss it.

Regards,

[Your Name]

The phone call is crucial here. It's much harder to ignore a person than an email. Be polite, state the facts (invoice number, amount, how overdue it is), and ask a direct question: "When will the invoice be paid?"

Stage 3: The Final Notice (15-30 Days Overdue)

This is the last email in your standard chasing sequence. It should be formal and clearly state the consequences of non-payment.

• Action: Send a "Final Notice" email.
• Tone: Formal, serious, and direct.
• Example Wording:

Subject: FINAL NOTICE: Invoice #123 - Payment Required Immediately

[Client Name],

We are writing to you regarding invoice #123 for £[Amount], which is now significantly overdue. Despite previous reminders, we have not received payment or a valid reason for its delay.

Please be advised that if the full outstanding balance is not paid within the next 7 days, we will have no alternative but to escalate the matter. This will include applying statutory late payment charges as permitted under the Late Payment of Commercial Debts (Interest) Act 1998.

We urge you to settle this matter immediately to avoid further action.

Sincerely,

[Your Name/Accounts Department]

Escalation: When the Standard Process Fails

If your final notice is ignored, you move from credit control (managing payments) to debt recovery (collecting a debt).

Applying Statutory Late Payment Charges

For most UK B2B invoices, you have a legal right to charge interest and a fixed compensation sum once an invoice becomes overdue.

• Interest: You can charge interest at the Bank of England's base rate plus 8%. This is known as 'statutory interest'. As the base rate changes, you should check the current rate when calculating this.
• Compensation: You can also add a one-off fixed compensation sum. The amount depends on the size of the debt.

Debt Value	Fixed Compensation Sum
Up to £999.99	£40
£1,000 to £9,999.99	£70
£10,000 or more	£100

You can add these charges to a new, updated invoice or statement of account and send it to the client, explaining that these have been added in line with your legal rights due to continued non-payment. Sometimes, the formal application of these charges is enough to prompt a payment.

The Letter Before Action (LBA)

This is a formal letter that is the final step before initiating legal proceedings (like using the small claims court). It must be sent via post (recorded delivery is best). The letter sets out the debt, the history of attempts to recover it, and gives the debtor a final deadline (e.g., 14 days) to pay before you file a court claim. There are specific formats for an LBA, and it's a serious legal document.

The Monthly Credit Control Review

A healthy process isn't just about doing; it's about reviewing. Once a month, you or your team should step back and analyse your accounts receivable performance. This meeting doesn't need to be long, but it must be consistent.

Key Metrics to Review

• Aged Debtor Report: This is your most important tool. It's a list of all your unpaid invoices, categorised by how long they have been outstanding (e.g., Current, 0-30 days overdue, 31-60 days, 61-90 days, 90+ days). All major accounting software (Xero, QuickBooks, etc.) can generate this report in seconds. Your goal is to keep as much money as possible in the 'Current' column and as little as possible in the '60+' columns.
• Debtor Days (DSO - Days Sales Outstanding): This metric shows you the average number of days it takes for your clients to pay you. The formula is: (Total Accounts Receivable / Total Credit Sales) x Number of Days in Period. A lower number is better. Tracking this month-on-month tells you if your credit control process is getting more or less effective.
• Problem Clients: Your aged debtor report will quickly highlight repeat offenders. In your monthly review, you need to make a strategic decision about these clients. Should you move them to 'payment upfront' terms? Shorten their credit period? Or, in the worst cases, is it time to stop working with them altogether? A client who pays 90 days late consistently can be less profitable than a smaller, more reliable one.

By creating this monthly rhythm, you turn credit control from a stressful, reactive firefight into a predictable and professional business process that protects your most important asset: your cash flow.

---

Automating Your Credit Control Rhythm

A manual credit control process works, but it takes discipline and time that many small business owners don't have. This is where automation can be a game-changer. InvoiceReminder is a tool built for UK small businesses, freelancers and their accountants that connects to Xero, FreeAgent, Sage and QuickBooks to automate the entire invoice chasing sequence.

You can set up your own schedule of emails—from the polite pre-due date nudge to the firmer follow-ups and final notice—and the system will send them for you. This ensures no overdue invoice is ever forgotten and that your chasing is always consistent and professional, helping you get paid faster without the manual effort. The core email reminder service is currently available at no cost.

---

Frequently asked questions

When can I legally charge interest on a late invoice in the UK?

For business-to-business (B2B) transactions, you can charge statutory interest as soon as an invoice becomes overdue, according to the Late Payment of Commercial Debts (Interest) Act 1998. The default payment period is 30 days unless a different term was agreed upon. You can charge interest at 8% plus the Bank of England base rate, plus a fixed compensation sum. This is a general guide, and specific contract terms may vary.

What are 'debtor days' and why do they matter?

Debtor days, or Days Sales Outstanding (DSO), is a key performance indicator that measures the average number of days it takes for your customers to pay their invoices. A lower number is better as it signifies a shorter gap between you doing the work and getting the cash in your bank. Tracking your debtor days monthly helps you understand the health of your cash flow and the effectiveness of your credit control process.

Should I stop work for a client who hasn't paid an old invoice?

In most cases, yes. It is a standard and reasonable business practice to pause or "go on stop" for a client who has a significantly overdue invoice. Continuing to provide services to a non-paying client increases your financial risk. Before stopping work, you should communicate this clearly, referencing your payment terms and the overdue balance, and give them a final opportunity to pay.

What's the difference between credit control and debt collection?

Credit control is the proactive, internal process of managing your invoices and ensuring clients pay on time. It includes sending timely invoices, reminders, and following up according to a set schedule. Debt collection is the reactive process of recovering a debt after your own credit control efforts have failed. This is often outsourced to a specialist debt collection agency or pursued through legal channels like the small claims court.

How long should my payment terms be?

Standard UK payment terms are often 30 days, but there's no single "correct" answer. For new clients or smaller projects, 7 or 14 days is common and wise. Longer terms like 60 days put more strain on your cash flow. The key is to choose terms that suit your business's cash flow needs and to ensure they are clearly communicated and agreed upon before any work begins.

My client says they never received the invoice. What should I do?

This is a very common delay tactic. The best response is to be helpful but firm. Immediately resend the invoice while you are on the phone with them, or in an email, and ask them to confirm receipt. Note the date and time of this conversation. This removes the excuse and restarts the conversation about when the payment will actually be made. Using accounting software that shows when an invoice has been viewed by the client can also help counter this claim.