Credit Control, Cash Flow and Late Payers

Knowing your customers and getting a grip on credit control is vital for your cash flow management. Here are some tips to help you get paid on time and deal with late payers…

Check out new customers

Establish a credit control policy for new customers. Get references from other companies who have traded with them.  Ensure that each customer signs an order form with your terms and conditions clearly stated before you deliver any goods or services.

Insist on payment up front

If you’re dealing with an habitual late payer or you suspect that a new customer may have problems paying, insisting on payment up front or payment by monthly direct debits can help prevent future cash flow problems.

Get personal

Get to know the person(s) responsible for approving and paying the invoices you’ll be sending and make sure you have their correct contact details. Include your payment terms and acceptable payment methods on every invoice you send. Incorrect information on an invoice can cause dispute and payment delays so make sure the details are clear and accurate.

Send a statement of account

Send each customer a statement of their account at the month end. The statement should highlight any overdue invoices and clearly state your acceptable payment methods.

Send a reminder

If an invoice is overdue you’re entitled to ask for payment. Send the customer an email reminder. Tell them you invoiced however many days ago, the amount is now overdue and you expect payment in full by the end of the week.

credit control and cash management

Stay calm

If the customer is unresponsive you need to stay calm. Make a phone call. Note the name of the person you speak with and the details of your conversation with them.

Gather information

Try to gather as much information as possible. Are they struggling financially? When do they normally pay invoices? Why hasn’t your invoice been paid yet? Are they unhappy with the work you did? Are they disputing the amount?

Be persistent

Be persistent but don’t harangue or threaten the customer. Make one phone call and follow up with a reminder email each week. Keep reiterating the facts (e.g. the date you delivered, the date you invoiced, your payment terms, the number of days overdue). Don’t get the details wrong because you’ll lose credibility and the customer will most likely ignore your payment request.

Agree a repayment plan

Your customer may be genuinely struggling, in which case you may want to agree on payment by instalments. To receive half now and the rest maybe next month for example is better than nothing at all!

Consider letting it go

If the invoice remains unpaid after 60 days you’ll need to decide if the debt is worth the time and expense of recovering it. Base your decision not on emotion but on your assessment of the customer’s ability to pay and the impact that non-payment will have on your business. For example – a debt of less than £100 is probably best written off, but if your other customers get to hear about it they might think they can also get away with not paying you.

Issue a final demand letter

If you want to recover the debt you’ll need to get tough and give the customer one last chance to pay. Write a Final Demand letter and address it to a named person at the business rather than “Dear Accounts Department” or “To whom it may concern”. This is your final letter before taking action to recover the debt by legal means so be sure to include the following details:

  • the amount owing (the debt);
  • the date when the invoice should have been paid;
  • a statement of intent either to refer the debt to a Debt Collection Agency or to issue legal proceedings for a County Court Judgment (CCJ) if the debt is not paid by a deadline (normally 7 or 14 days);
  • the costs of enforcement and any interest that that will be claimed, in addition to the outstanding debt;
  • a reference to the Government’s Practice Direction on Pre-Action Conduct and Protocols (PDPACP), which explains the steps that a civil court would normally expect parties to take before commencing proceedings.

Send this letter by email. Use a regular mail service to deliver a hard copy and obtain proof of postage. Most businesses will want to protect their credit rating and a properly-worded final demand will usually encourage a reluctant debtor to pay up.

Debt collection agency or DIY debt recovery?

If you don’t receive payment in the specified time you’ll need to follow up on your final demand. You can refer the debt to a collection agency but be prepared to pay a commission that may be as much as 50% of the money recovered. If the debt is under £100,000 you can try to obtain the money yourself through the Money Claim Online service; you’ll need to pay a fee up front but you can add that cost plus interest on to your claim against the debtor.


Getting paid on time is a matter of being well organised and well informed. It takes time and effort. You’ll find credit control and cash flow management much easier if you hire a bookkeeper who can maintain proper records and be proactive with your customers.

Related post – Debt Recovery, Court Orders and Judgement Enforcement.

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