Sep 19, 2025
Many businesses excel at maximising sales but struggle to collect payments. If there’s a gap between generating revenue and managing cash flow, it can cause major issues, from slowed growth to serious financial risk.
This is where credit control comes in. By managing receivables and ensuring customers pay on time, businesses can protect their cash flow, reduce bad debt, and support long-term growth.
Credit control is the process of monitoring and managing a company’s receivables to ensure timely customer payments. It goes beyond simple reminders and includes:
Setting clear payment terms
Assessing customer creditworthiness
Monitoring overdue invoices
Applying collection strategies where needed
An effective credit control system ensures stable cash flow, reduces financial risk, and builds stronger customer relationships.
Every business aims to have customers who both buy products and pay on time. Credit control creates a structured process to manage this.
A business sells goods on 30-day payment terms.
Before offering credit, they check the customer’s financial reliability.
Clear terms are agreed (due date, late fees, etc.).
Payments are monitored, and reminders sent if overdue.
If unpaid, follow-up actions are taken (calls, plans, or formal recovery).
This ensures:
Steady cash flow
Reduced bad debt through early risk checks
Stronger customer relationships by keeping terms transparent
Evaluate Customer Creditworthiness
Analyse financial records, payment history, and reliability before granting credit.
Define Credit Terms and Limits
Set deadlines, limits, and late payment penalties to avoid disputes.
Generate and Send Invoices Promptly
Provide clear, detailed invoices with due dates and payment methods.
Monitor Payments and Follow Up
Track receivables, send reminders, and maintain regular contact with late payers.
Review and Update Credit Policies
Adjust terms and strategies based on performance, customer behaviour, or market changes.
Businesses typically choose one of three strategies:
Low-risk approach
Credit only offered to customers with excellent history
Protects cash flow but may limit sales growth
Balanced approach
Credit extended to customers with average history
Supports growth while controlling risk
High-risk, sales-focused approach
Credit offered widely to maximise opportunities
Increases risk of late payments and bad debt
A credit control letter is used to manage overdue payments and reinforce terms. It serves as a professional reminder while maintaining customer relationships.
Company details (name, address, phone, email)
Date of issue
Customer details (name, company, contact)
Overdue invoice details (number, date, amount, due date)
Supporting documents (e.g., copy of invoice)
Clear request for payment and next steps
A polite but firm letter helps protect professionalism while encouraging prompt payment.
Strong credit control is vital for cash flow stability, growth, and financial health. Businesses should regularly review strategies and adapt to customer behaviour and market conditions.
Modern tools, such as order-to-cash automation software, can enhance credit control by:
Automating invoicing
Tracking payments
Sending reminders
Reducing manual workload and errors
On average, credit management software can cut bad debt by up to 20%, making it a worthwhile investment.
What is the difference between credit control and credit management?
Credit control focuses on actions to prevent and resolve late payments. Credit management is broader, covering risk assessment, setting terms, and long-term financial strategy.
Is credit control the same as debt collection?
No. Credit control is proactive, aiming to prevent late payments. Debt collection is reactive and involves recovering significantly overdue debts, often through legal means.
What are the 4 methods of credit control?
Credit risk assessment
Setting credit limits
Payment terms and enforcement
Credit monitoring and adjustments
What is a credit control system?
A structured framework of policies, processes, and tools to assess, manage, and collect customer credit while reducing financial risk.
