Profitable businesses fail because of cash, and most of the cash is sitting in the sales ledger. Credit control is the unglamorous discipline that converts revenue into money in the bank — and it is worth knowing that the law is considerably more helpful than most suppliers realise: on a commercial debt you can charge interest at 8% above base rate and claim a fixed recovery sum of up to £100, without any of it appearing in your contract.
The terms you set before the invoice exists
Credit control starts long before anything is overdue. If you agree no payment date, statutory default terms apply: the payment is late 30 days after the customer receives the invoice, or after you deliver the goods or perform the service if that is later. Agreeing longer terms is permitted but they can be challenged if grossly unfair to the supplier.
Everything that follows is easier if four things were done at the start: the customer was credit-checked and given a limit proportionate to the risk; the terms were agreed in writing and acknowledged; the person who authorises payment was identified by name; and the invoicing requirements — purchase order number, reference, portal, supporting documents — were established. A large share of "slow payers" are not slow at all: their systems rejected an invoice three weeks ago and nobody at either end noticed.
A ladder, not a reminder
Effective collection is a sequence with fixed timings, applied to every account the same way, with escalating seriousness and no gaps:
- Before the due date — a short courtesy check that the invoice is approved and scheduled for payment. This single step removes most disputes from the process while there is still time to fix them;
- Day 1 to 7 overdue — a polite written reminder with a copy invoice and a request for a payment date, not a request for payment;
- Day 8 to 21 — a telephone call. Email is easy to ignore; a call to a named person, followed by written confirmation of whatever they promised, is what changes behaviour;
- Day 21 to 30 — escalation to the customer's finance manager and your own, with the statutory interest entitlement stated for the first time;
- Day 30 plus — a stop on further supply, which is usually the most powerful lever you have and the one businesses are most reluctant to pull;
- Day 45 plus — a formal letter before action, then legal recovery.
What matters here is consistency rather than aggression. Customers allocate payments to suppliers who follow up predictably, and they learn within two cycles which of their suppliers those are.
The statutory rights most suppliers never use
Under late payment legislation, on a business-to-business debt you are entitled to statutory interest at 8% plus the Bank of England base rate, plus a fixed sum for recovery costs based on the size of the debt: £40 for debts under £1,000, £70 for debts of £1,000 to £9,999.99, and £100 for debts of £10,000 or more. You can also claim reasonable additional recovery costs beyond the fixed sum. None of this needs to be in your terms and conditions — it applies by statute. The exception to know before relying on it: where your contract already provides its own substantial remedy for late payment, that remedy applies instead of the statutory one. A contract rate that is a real deterrent displaces statutory interest; a token rate does not, and the statutory entitlement revives. So check what your own terms say before assuming the 8% is available — sometimes your contract has quietly given it away.
Most suppliers never invoke it for fear of damaging the relationship, and that is a legitimate commercial judgement. But the entitlement has value even unexercised: stating it in an escalation letter signals that the account has moved from administrative to serious, and waiving it explicitly as a gesture is worth more than never mentioning it. Where a customer is genuinely difficult, charging it is a rational response to being used as an unsecured lender.
Security, and the last resort
For larger or riskier exposures, the protections worth having are contractual: a retention of title clause that survives insolvency for identifiable goods, a personal guarantee from a director of a thinly capitalised customer, a deposit or staged payments on long projects, and credit insurance where the concentration risk justifies the premium.
When recovery becomes legal, the route for an undisputed debt is a letter before action, then a claim through the County Court — straightforward and comparatively cheap for clear debts. Against a company, a statutory demand for a debt of £750 or more, unsatisfied after 21 days, opens the door to a winding-up petition. It is a powerful threat and a poor collection tactic: if the debt is genuinely disputed, presenting a petition can leave you paying the other side's costs, and if the customer really cannot pay, winding them up returns pennies. Use it for solvent customers who simply will not pay, and take advice before you do.
Measuring whether any of it works
Three numbers tell you most of what you need: days sales outstanding and its trend; the aged debtor profile, particularly the balance over 90 days; and the proportion of the ledger held by your largest three customers. Track them monthly alongside the accounts rather than annually, and set a collection target the same way you set a sales target — collections respond to attention in a way that few other finance processes do.
The final discipline is writing off what is genuinely gone. A ledger carrying two-year-old balances nobody intends to chase misstates the debtor figure, flatters working capital and hides the real recovery rate. Provide properly, write off honestly, and reserve the effort for the debts that will actually pay.
Acumon builds and runs this discipline for clients through management accounts and cloud accounting, with a business health check where the ledger has been left to drift. If your average collection period has moved by a week in the last year, that is working capital leaving the business — and it is recoverable.