A credit control process for a small business, in one page
Credit control fails in small businesses for one reason: it is nobody's job. This is a routine that takes an hour a week and catches almost everything before it becomes debt.
Put the terms on the invoice
Payment terms, the due date as a date not a number of days, how to pay, and one sentence that the invoice carries statutory interest and compensation if paid late under the Late Payment of Commercial Debts (Interest) Act 1998. Mentioned once, factually, at the start, it is never a surprise later.
The weekly hour
- Run the aged debtor report. Every accounting system has one. Sort by due date.
- Send the pre-due reminders for everything falling due in the next seven days. Two lines each.
- Send first reminders for anything three to seven days late, with the payment details.
- Call anything over ten days late. One question: is there any reason this can't be paid this week?
- Write down every promise with a date, and confirm it by email within the hour.
- Note what is over 21 days and decide, this week, whether to hand it over.
Three triggers for handing over
- A promise to pay has been broken twice.
- The debtor has stopped replying for fourteen days.
- The invoice is 28 days late and nothing above has produced a date.
Handing over is not aggressive. The tone does not change; the sender does. A customer who has ignored their supplier often pays the first letter from a recovery firm, because it is a different conversation.
What to measure
One number: debtor days, the average time from invoice to payment. Track it monthly. A business on 30-day terms with 55 debtor days is funding its customers for nearly a month. Every day you take off it is cash in the bank without selling anything more.