In short: The credit control process is the sequence a business follows to make sure the credit it extends turns into cash. It runs in seven stages: check the customer and set a limit, agree terms in writing, invoice accurately and immediately, monitor the ledger, chase on a set cadence, resolve disputes, and escalate on defined triggers.
Most credit control failures are not chasing failures. They happen at stage one or stage three, and only become visible at stage five.
Credit control is often treated as the thing that happens once an invoice is late. By then most of the outcome is already decided. Whether a customer pays on time is largely determined by who was accepted as a customer, what was agreed in writing, and whether the invoice was correct and arrived quickly.
This guide sets out the process stage by stage: what good looks like, what commonly goes wrong, and what belongs in a written policy. It also covers the UK statutory rights most businesses never use, and the reforms the government has said are coming.
What is changing in 2026
Two things have already changed, and a third is on its way.
The Procurement Act 2023, implemented in stages from February 2025, puts a 30-day payment term into all public procurement contracts. The term is implied even where it is not written down, it extends down the supply chain to subcontracts contributing substantially to a public contract, and payment runs from receipt of the invoice rather than from validation of it. Contracting authorities publish payment compliance notices every six months.
The Fair Payment Code, launched in December 2024 and administered by the Office of the Small Business Commissioner, is a voluntary tiered scheme awarding Bronze, Silver and Gold status on evidence of payment behaviour. It is open to businesses of any size, and signatories that stop meeting the requirements can be investigated and removed.
In March 2026 the government published its response to the late payment consultation. It sets out an intention to cap business-to-business payment terms at 60 days, to require every commercial contract to carry a right to statutory interest, to remove the ability to agree an alternative remedy in place of that right, and to give the Small Business Commissioner power to fine persistent late payers based on published reporting data. Large businesses would also report on interest owed and interest actually paid.
Worth being precise about status: these are stated intentions from a consultation response. No commencement date, legislative vehicle or implementation timetable has been published. Treat them as direction of travel when designing a policy you will still be using in two years, not as current law.
The seven stages of the credit control process
| # | Stage | The question it answers |
|---|---|---|
| 1 | Onboarding and credit assessment | Should this customer have credit, and how much? |
| 2 | Terms and contract | What exactly has been agreed, and where is it written? |
| 3 | Invoicing | Is the invoice correct, and did it arrive straight away? |
| 4 | Monitoring | What is outstanding, how old is it, and who is over their limit? |
| 5 | Chasing | Who is being contacted, when, and through which channel? |
| 6 | Disputes and queries | Is this genuinely disputed, or just unpaid? |
| 7 | Escalation and write-off | At what point does something change, and who decides? |
Stage 1: onboarding and credit assessment
ACCA's guidance is blunt about the purpose: before granting credit, a company should ensure as far as possible that the customer is worthy of it and that bad debts will not result. A structured credit application collects registration details, trading and billing addresses, named contacts in accounts payable and purchasing, bank details, and trade references. For larger exposures it collects financial statements. A credit report from a recognised bureau supports the judgement rather than replacing it.
Two points get missed. First, assessment is not a one-off: ACCA is explicit that checks should continue for existing customers, because the purpose is early warning of a deteriorating position, and CICM highlights the moment a customer requests a credit increase as a particular trigger for review. Second, on limits, ACCA recommends starting each customer with an initial limit that grows only slowly as confidence builds, and bringing attempted breaches to the credit controller's attention rather than letting them pass unnoticed.
What goes wrong: credit granted under sales pressure without analysis; terms that do not vary by risk; bureau scores taken at face value without context; limits set once and never revisited; and, more often than it should be, an application form that never captured a named contact in accounts payable, which quietly guarantees a dispute at stage three.
Stage 2: terms and contract
Payment terms belong in the contract and on the invoice, not in someone's memory of a conversation. CICM recommends displaying terms on invoices including the right to charge interest if payment is delayed, which matters both practically and legally.
Dispute handling should be written down at this stage rather than improvised later: state that undisputed amounts are still paid on time and only the disputed portion is withheld, and require customers to raise disputes within a set number of days of receiving the invoice. Without that clause, a query raised on day 58 of a 60-day term becomes a reason to withhold the entire balance.
What goes wrong: terms that contradict operational practice, such as invoicing from the delivery date when the contract runs from the invoice date. And agreeing a contractual interest rate that is weaker than the statutory one, which, as covered below, removes the statutory right entirely.
Stage 3: invoicing
CICM sets the target at 100% invoice accuracy and describes the invoice as the key document in getting paid on time. Invoices should go out as soon as goods or services have been provided, state the due date and accepted payment methods clearly, and give a named contact for queries.
CICM's most useful instruction here is to look at payment methods from the customer's point of view and ask how convenient it actually is for them to pay. It singles out the situation where a customer can only pay by telephoning with card details during office hours. Every barrier of that kind is days added to the balance for reasons that have nothing to do with willingness to pay.
What goes wrong: missing purchase order references, incorrect prices or quantities, invoices emailed to unmonitored generic addresses, and invoices that fail a customer's portal requirements and are rejected without anyone noticing for a fortnight.
Stage 4: monitoring
ACCA names the two reports that run this stage. The aged receivables analysis shows what is outstanding from each customer and for how long, which surfaces breaches of terms. The credit utilisation report shows how much of each customer's limit is currently in use, which informs limit changes and catches breaches before the next order ships.
What goes wrong: in small teams, monitoring is the first thing dropped under workload, so the first sign of trouble is a debt already badly overdue. In large teams the data usually exists but the reporting is not aligned to any decision anyone actually makes.
Stage 5: chasing
A working cadence has three tiers: a reminder before the due date, a message on the due date, and a structured sequence afterwards. ACCA lists the escalating methods: statements, chasing letters addressed to a named senior person rather than a general mailbox, telephone calls, and personal approaches from senior people on the supplier's side. It notes that phone calls carry weight partly through nuisance value, and that personal approaches work particularly well in relationship-driven sectors such as professional services.
CICM's emphasis is on consistency: systematic reminders, clear and consistent messaging, and proactive communication. Consistency is what teaches a customer where the real deadline is. Sporadic chasing teaches them the opposite.
What goes wrong: email-only chasing that is simply ignored; never reaching a senior contact; two departments sending different messages on the same day; and no contact at all on the due date itself, which is the single cheapest touch available.
Stage 6: disputes and queries
The first job is to tell a genuine dispute apart from an invoice that is simply unpaid, and to log it with the invoice number, the nature of the dispute, the date raised and the supporting evidence. CICM requires the policy to define who resolves issues preventing payment, on what timescale, and how they escalate internally.
Disputes are cross-functional by nature: operations supplies proof of delivery, sales confirms what was agreed on price, technical teams assess quality claims. The stage that gets skipped is root cause analysis. Closing a hundred disputes individually while the mispricing that caused them continues is not dispute management.
What goes wrong: verbal disputes that are never recorded, so chasing continues in ignorance and damages the relationship. And failing to separate disputed from undisputed amounts in the ledger, which distorts the ageing and the DSO figure built on it.
Stage 7: escalation and write-off
Escalation should be triggered by defined thresholds, not by mood. CICM requires the policy to identify who has authority to remove a customer from the standard collections process and who can approve a write-off.
ACCA describes stopping supply as a powerful collection tool, particularly where the supplier provides something unique or critical, while cautioning that it can cost future business. It classes external collection agencies and legal action as costly, likely to lose the customer, and therefore last resorts. On bad debt, ACCA's position is that it is an inevitable risk of offering credit at all, and the practical failure is delaying recognition to avoid admitting the loss, which leaves the balance sheet describing a position that does not exist.
The UK rights most businesses never use
On business-to-business invoices, UK suppliers have statutory rights that are widely known in outline and rarely exercised in practice. The reticence is usually the creditor's own: concern about the relationship, uncertainty about calculating it correctly, or reluctance to enforce against a large customer.
Under the Late Payment of Commercial Debts (Interest) Act 1998, you can charge statutory interest at 8% above the Bank of England base rate. For invoices falling due in the second half of 2026 that is 11.75% a year. You can also charge a fixed sum toward recovery costs:
| Amount of debt | What you can charge |
|---|---|
| Up to £999.99 GBP | £40 GBP |
| £1,000 to £9,999.99 GBP | £70 GBP |
| £10,000 GBP or more | £100 GBP |
Four details that change how usable this is:
- The fixed sum is not the limit. Government guidance states that a supplier can also claim reasonable costs each time it tries to recover the debt, on top of the fixed amount.
- A contractual rate cancels the statutory one. You cannot claim statutory interest if a different rate of interest is specified in the contract. A poorly drafted clause can quietly remove a right worth far more than the clause.
- Public authorities are a floor, not a ceiling. You cannot use a lower interest rate in a contract with a public authority.
- Interest needs invoicing. Government guidance is that you should send a new invoice if you decide to add interest to what you are owed.
The arithmetic is straightforward. Government guidance works it through: on £1,000 GBP owed with a base rate of 0.5%, statutory interest of 8.5% is £85 GBP a year, which divided by 365 is 23 pence a day, so 50 days of lateness costs the customer £11.50 GBP.
This is general guidance, not legal advice, and it covers business-to-business supply in the UK. Your own contract terms may change the position.
What belongs in a written credit control policy
CICM defines a credit policy as a set of rules a business uses to manage the extension of credit to customers, and says having one defines what best practice looks like internally and drives consistency. It should cover:
- Who carries out credit risk assessments, how, when, and how the outcome is communicated
- How credit limits are set and reviewed, and how stopping supply works when a limit is breached
- Standard payment terms and accepted payment methods, reproduced in contracts or linked from them
- The standard collections process: procedures, frequency, and channels
- The trigger points for escalation
- The query resolution process: who resolves what, on what timescale, escalating to whom
- Who can remove a customer from the standard collections process, and who can approve a write-off
- Which KPIs are tracked, how often, and who reviews them
Two additions worth making. State the organisation's risk appetite explicitly, including concentration risk where a few large customers dominate the ledger. And define how sales and credit control work together, because siloed decisions are how limits get raised informally and terms get promised that finance never agreed.
Measuring it
CICM names days sales outstanding, days delinquent, bad debt ratio, query resolution time, and customer satisfaction. ACCA adds the aged receivables analysis and the credit utilisation report as the operational views.
Use them causally rather than as a scoreboard. A rising DSO driven by more disputes points at invoicing and dispute resolution, not at the chasing team. A bad debt ratio rising in one segment points at onboarding criteria for that segment. ACCA's guidance for periods of stress is to monitor more frequently and adjust terms, chasing intensity and risk appetite quickly rather than waiting for the quarterly review.
Small teams and large ones
The stages are the same; the implementation is not. Smaller teams run on relationships and personal contact, which is genuinely effective and does not scale, and where the policy is often unwritten. ICAEW and ACCA both encourage writing it down even briefly, because the risk in a small team is inconsistency rather than complexity. Larger teams have specialists, formal policies and detailed reporting, and their characteristic failure is generating data nobody acts on.
On automation, the sensible split is by nature of the task rather than by size of team. Reminders, statements, ageing reports and ledger monitoring are routine, high volume and rules-based. Disputes, negotiations and decisions on high-exposure accounts are not. CICM's training material makes the point directly: negotiation and customer care depend on empathy and adaptability, which is exactly what should not be automated. Automate the cadence so the humans have time for the conversations that need one.
See how much of this process runs itself once the cadence is automated.
Speak to an expertFrequently asked questions
What are the stages of the credit control process?
Seven: onboarding and credit assessment, agreeing terms in writing, accurate and immediate invoicing, monitoring the ledger, chasing on a set cadence, resolving disputes, and escalation or write-off. The stages are the same whatever the size of the team; only the tooling changes.
What is the difference between credit control and debt collection?
Credit control is the whole process of granting credit and converting it to cash, running from customer onboarding onwards. Debt collection is one escalation route within it, used when the standard process has not worked. ACCA treats external collection and legal action as last resorts because both are costly and usually cost you the customer as well.
Can you charge interest on late B2B invoices in the UK?
Yes. The Late Payment of Commercial Debts (Interest) Act 1998 allows statutory interest at 8% above the Bank of England base rate, which is 11.75% a year for invoices falling due in the second half of 2026, plus a fixed recovery charge of £40, £70 or £100 GBP by debt size. You cannot claim it if the contract specifies a different interest rate, and you should issue a new invoice for the interest.
What should a credit control policy include?
Per CICM: how risk assessments are done and by whom, how credit limits are set, reviewed and enforced, standard terms and payment methods, the collections process and its escalation triggers, the query resolution process, who can authorise removing a customer from standard collections or writing off a debt, and which KPIs are tracked and reviewed.
How often should you chase an overdue invoice?
Consistently rather than frequently. A reminder before the due date, a message on the due date, then a structured escalation afterwards, applied the same way to every customer. CICM's emphasis is on systematic follow-up and consistent messaging, because inconsistent chasing teaches customers that the due date is negotiable.
Is the law on late payment changing?
The government published its response to the late payment consultation in March 2026, setting out an intention to cap B2B payment terms at 60 days, require every commercial contract to carry a right to statutory interest, remove the option to agree an alternative remedy, and let the Small Business Commissioner fine persistent late payers. No commencement date or legislative timetable has been published, so this is direction of travel rather than current law.
Where to start
If the process is not written down, start there, briefly. Then check the two stages that decide most outcomes: does every customer have a limit someone set deliberately, and does every invoice go out the day the work is done, correct, to a named person, with a way to pay that takes one click. Fixing those two is usually worth more than any amount of additional chasing. Once they are right, automating the cadence is what frees the team to work the accounts that genuinely need a conversation. Chaser's guide to accounts receivable automation covers how that layer works.
