Credit control: getting paid on time without souring the relationship

Credit control is the discipline of deciding who you will let owe you money, how much, for how long, and what happens when they do not pay. Almost every small company treats it as the chasing that starts after an invoice goes overdue. That is the last and least effective step. The decisions that determine whether you get paid were made earlier — at the point you agreed to work without payment up front.

Extending payment terms is lending. A thirty-day invoice for 50 000 is an unsecured thirty-day loan to a company whose finances you may never have looked at, made by someone who is not in the lending business. Framing it that way changes the questions you ask before the work starts, which is where credit control actually lives.

The parts of a credit control policy

• Terms by customer type. Not everyone gets the same. New customers, small orders and consumer sales can be prepaid or on shorter terms without anyone being insulted.
• A credit limit per customer — the most you are willing to be owed at any one time — checked before new work is accepted rather than after the exposure exists.
• A check before extending terms for the first time. For a business customer that means the public register, how long they have traded, and asking for a reference if the amount is material.
• A stop point. The value of unpaid invoices at which you pause new work. Deciding this in advance is what stops it becoming an argument in the moment.
• An escalation ladder with dates: reminder before due, reminder on the day, a call in the first week, a formal letter, then a decision about recovery.
• One named owner. Credit control done by whoever remembers is credit control that stops the first busy week.

The escalation ladder that works

1. Three days before due: a short, neutral reminder. This is not chasing — it is a courtesy that catches the invoice sitting in the wrong mailbox, which is the single most common reason for late payment.
2. On the due date: a plain note that it is due today, with the invoice attached again. Never assume they still have it.
3. Seven days late: a phone call, not an email. The purpose is to find out whether there is a dispute, a missing purchase order number, or a cash problem — three situations needing three different responses.
4. Fourteen days late: written, firmer, naming the consequence — work pauses, or interest applies under the terms they accepted.
5. Thirty days late: stop new work and decide. Recovery costs money and relationships; sometimes a payment plan in writing is the better answer.

Most late payment is administrative, not financial. A wrong reference, an invoice sent to a person who left, a missing purchase order number, an approval sitting with someone on holiday. That is why the friendly reminder before the due date is worth more than three angry ones afterwards — it catches the administrative cases while they are still cheap, and leaves the firm approach for the small number that genuinely need it.

The numbers to watch

• Days sales outstanding — average days between invoicing and payment. Watch the direction over quarters, not the absolute figure.
• Aged debt in buckets: current, thirty, sixty, ninety plus. The ninety-plus column is where money quietly stops being real.
• Concentration: what share of what you are owed sits with one customer. Above a quarter, one late payer becomes a payroll problem.
• Disputed share. If a meaningful slice of overdue invoices is disputed, the problem is in how you quote or deliver, not in collections.

Where the tooling helps

Ettex Invoices issues the invoices, tracks what is unpaid, and holds the reminder sequence, so the ladder above runs on dates rather than on somebody remembering. Aged balances flow into Ettex Books, and the customer context — who to call, what was agreed, previous disputes — belongs with the record in Ettex CRM. Reminder wording is covered separately in payment reminder email.

What it is not: there is no credit scoring, no company-register lookup, no automatic credit checking and no integration with a debt collection agency. Those are separate services and you buy them where you need them. The limit and the check are decisions you make; the software holds the record and runs the schedule.

The routine document is a statement of account: everything outstanding on one page, sent on a schedule rather than only when something is late. Many disputes are not disputes at all but a missing invoice, and a statement surfaces those a month before a chase would.

Two documents settle most of what looks like reluctance to pay. A statement of account surfaces invoices the customer never received, and a credit note closes a genuine dispute cleanly rather than leaving a balance to age indefinitely.