Credit Control Tactics That Eliminate Late Payments

Late payments are one of the most frustrating challenges in business. You deliver the work, the customer is happy, and then the waiting game begins. Days turn into weeks, and before you know it, your cashflow is under pressure.

In the UK, late payments remain a serious issue for small and medium-sized businesses. According to the Federation of Small Businesses, over half of SMEs experience late payment problems, with many waiting more than 30 days beyond agreed terms. Not only are late payments an inconvenience, they can also stall growth, force the use of expensive borrowing, and create unnecessary stress.

In our experience, the knock-on effect often reaches beyond the finance team, impacting operations, marketing budgets, and even hiring plans. The earlier you address the issue, the more options you have to resolve it without disrupting the wider business.

The good news is that with the right approach, you can reduce debtor days, improve cashflow, and spend less time chasing invoices.

Why Late Payments Hurt More Than You Think

When payments are delayed, the impact goes beyond an empty bank account.

It is the same principle we apply to tax planning. Waiting until year-end to address a problem often means the solutions are limited. Acting early puts you in control.

By monitoring your debtor days alongside your profit margins, you can see the real cost of late payment to your bottom line. This also helps you link credit control directly to wider growth planning, something we often encourage in strategic accounting for growth.

Spotting the Warning Signs Early

You can often see the signs of a potential late payer before a payment is overdue:

• A previously prompt customer starts taking longer to pay.
• Invoice queries become more frequent and minor.
• You hear about downsizing, cashflow issues, or other business changes.

Just as we encourage regular cashflow forecasting, monitoring payment patterns should be part of your monthly review. 

This is particularly important ahead of seasonal peaks or slower trading periods, when cash reserves need to be managed carefully. Spotting a pattern early means you can adjust your payment terms, request deposits, or even pause work until accounts are settled.

Setting Strong Foundations in Your Invoicing

Clear terms and prompt invoicing set the tone from the start.

• Put payment terms in writing on every quote and invoice.
• Request deposits or staged payments for larger projects.
• Send invoices immediately after work is complete rather than batching them at the end of the month.

These practices help you maintain strong working capital, ensuring you have funds available for expenses and growth. 

Where possible, link your invoicing directly to your accounting software so that no work slips through without billing. Even simple steps like using invoice numbering consistently can make disputes quicker and easier to resolve.

Using Technology to Automate and Remind

Digital accounting tools make it easier to stay on top of unpaid invoices without adding to your workload. Platforms like Xero allow you to:

• Send automated reminders at set intervals.
• Track which invoices are approaching their due date.
• Flag high-value outstanding amounts for quicker follow-up.

Automation removes the awkwardness of manual chasing and keeps payment timelines consistent. It also frees up your time to focus on proactive tasks such as improving profitability or planning for tax efficiency. We have seen many businesses reduce debtor days simply by enabling features they already had within their accounting software.

Building a Consistent Credit Control Process

A structured approach works best. Having a clear timeline for chasing invoices avoids awkward gaps where payments are left unaddressed. 

It also sends a message to customers that you take payment terms seriously, which can prevent repeat delays. Here’s an example of a healthy credit control process.

Much like managing payroll or VAT returns, having a clear process means nothing slips through the cracks.Consistency also makes it easier to train staff and delegate credit control without losing effectiveness. By documenting your process, you can also identify bottlenecks and refine your approach over time.

Using Your Legal Rights Wisely

Under the Late Payment of Commercial Debts (Interest) Act 1998, you have the right to charge statutory interest on overdue invoices and claim reasonable debt recovery costs.

However, the decision to apply these charges should balance business needs with customer relationships. For some, it can be a helpful deterrent. For others, it may be better to resolve the situation without penalties to preserve goodwill.

If you do choose to apply statutory interest, make sure your payment terms clearly reference this legal right. This will give you a stronger position if you ever need to take formal action.

Prevention Beats Cure

Prevention starts with due diligence:

• Carry out credit checks on new customers.
• Set sensible credit limits.
• Be prepared to walk away from work that carries a high risk of non-payment.

It is the same principle we often discuss around avoiding unprofitable work. Sometimes saying no to a high-value order is the smartest financial decision.

Regularly reviewing your customer list can also highlight accounts where payment terms need to change. Treat credit terms as a privilege that is earned through trust, not as a default for all customers.

Money conversations do not need to be confrontational. A polite but direct phone call is often more effective than another email. In genuine hardship cases, offering a payment plan can secure at least part of the invoice while maintaining the relationship.

This approach can also strengthen loyalty, as customers see you are willing to work with them in good faith. However, be clear about boundaries so that flexibility does not turn into indefinite delays.

Make Late Payment a Rarity, Not the Norm

Consistent processes, the right technology, and early intervention can make late payments far less common. This is about protecting your business, your people, and your ability to grow without unnecessary financial pressure.

Combining strong credit control with wider strategic planning will help ensure your business is ready for both opportunities and challenges. The key is to make payment discipline part of your overall financial culture, not just a reaction when things go wrong.

If you want to review your invoicing process, credit control procedures, or cashflow forecasting, we can help you build a system that supports long-term stability and growth. Get in touch with us to start improving your cashflow today.