Cash flow remains the lifeblood of any UK business. In 2026, navigating the financial landscape requires more than just making sales; it requires ensuring that the money owed to you actually lands in your bank account.
Without robust systems in place, even profitable companies can face insolvency simply because they ran out of cash.
This guide explores the best 10 credit control tips designed to fortify your financial position this year. Whether you run an SME or a large corporation, these strategies will help you maintain healthy cash flow and reduce the risk of bad debt.
What Is Credit Control?
Before diving into specific strategies, it is crucial to understand the fundamentals. So, what is credit control?
In simple terms, credit control refers to the processes a business uses to ensure that customers pay for the goods or services they have received. It involves vetting new customers, setting credit limits, invoicing correctly, and chasing overdue payments.
Effective business credit control is not just about chasing money; it is about creating a culture of timely payment and managing the risk of an outstanding invoice even before a sale is even made.
Good credit control bridges the gap between issuing an invoice and receiving payment. It is a proactive function that protects your company’s financial health.
1. Implement Rigorous Know Your Customer (KYC) Checks
In 2026, digital tools make it easier than ever to verify who you are doing business with, yet many companies still skip this vital step. Before you extend credit to any new client, you must perform due diligence.
Why Verification Matters
Offering credit is essentially lending money. You wouldn’t lend a stranger £10,000 without knowing if they could pay it back. The same logic applies to your goods and services.
Actionable Steps:
- Credit Reports: Use reputable credit reference agencies to check the creditworthiness of new clients. Look for County Court Judgments (CCJs) or a history of late payments.
- Director History: For limited companies, check the history of the directors. Have they been involved in multiple dissolved companies? This can be a red flag.
- Trade References: Ask for references from other suppliers and actually contact them. Ask specific questions about payment reliability.
By filtering out high-risk customers at the start, you significantly reduce the workload for your credit control team later down the line.
2. Establish Clear and Concise Payment Terms
Ambiguity is the enemy of timely payment. Your terms and conditions (T&Cs) are the legal backbone of your business credit control strategy. If your terms are vague, you give debtors a loophole to delay payment.
Updating Terms for 2026
Ensure your T&Cs are compliant with current UK legislation and clearly state your expectations.
What to Include:
- Payment Due Date: Be specific. Instead of “payment due within 30 days,” specify “payment due 30 days from invoice date.”
- Late Payment Interest: Explicitly state your right to charge interest on overdue invoices under the Late Payment of Commercial Debts (Interest) Act 1998.
- Retention of Title: Include a clause that states the goods remain your property until they are paid for in full.
Make sure these terms are signed and agreed upon before any work begins. Printing them on the back of an invoice is often too late legally; they need to be part of the initial contract or onboarding documentation.
3. Automate Your Invoicing Process
Human error is a leading cause of delayed payments. An invoice with the wrong date, incorrect address, or missing purchase order (PO) number gives a client a valid reason to stall.
The Power of Accuracy
In 2026, manual invoicing should be a thing of the past. Modern accounting software allows you to automate the creation and dispatch of invoices immediately upon fulfillment of an order.
Best Practices:
- Zero-Day Invoicing: Send the invoice the moment the goods are shipped or the service is completed. Every day you wait is an extra day added to your payment cycle.
- Required Information: Ensure every invoice includes the correct PO number, a clear description of goods, VAT registration numbers, and your bank details.
- Electronic Delivery: Send invoices via email to the specific accounts payable contact, not a generic info@ address. Request a “read receipt” or use software that tracks when an invoice is opened.
4. Build Relationships with Accounts Payable Departments
Credit control is often viewed as a confrontational task, but it is actually a customer service role. Developing a rapport with the person who actually presses the “pay” button can work wonders.
The Human Element
People pay people they like. If you are polite, professional, and helpful, your invoice is more likely to move to the top of the pile during a payment run.
Strategy:
- Courtesy Calls: Make a call a few days before the invoice is due. Frame it as a customer service check: “We’re just checking you received the invoice and that everything is in order for payment on the 30th?”
- Solve Problems Early: This pre-emptive call allows you to identify disputes or missing paperwork before the invoice becomes overdue. If they say “we never received it,” you can resend it immediately, removing the excuse for late payment later.
5. Implement a Strict Dunning Process
A “dunning process” is the methodical series of steps you take to communicate with customers regarding the collection of accounts receivable. Consistency is key here.
Structured Escalation
You need a timeline that triggers specific actions automatically.
- Day 1 (Overdue): Send a polite automated email reminder. “Just a friendly reminder that invoice #123 was due yesterday.”
- Day 7 (Overdue): A firmer email reminder attaching the invoice again.
- Day 14 (Overdue): A phone call from the credit control team. Direct conversation is harder to ignore than an email.
- Day 30 (Overdue): A formal letter of demand warning of potential further action, such as a credit hold.
Document every interaction. If you need to escalate to legal action or a debt collection agency, this paper trail proves you have made every reasonable effort to collect the debt.
6. Utilise Credit Limits and “Stop” Lists
Never let a bad debt grow. It is tempting to keep supplying a customer in the hope they will pay the outstanding balance, but this is a classic “throwing good money after bad” scenario.
Managing Exposure
Set a credit limit for every customer based on their credit check. Once they reach that limit, no further orders should be processed until the balance is reduced.
The “Stop” List
Be disciplined about putting accounts on stop.
- Communication: Inform the customer immediately if their account is on hold. “We’d love to process your new order, but we need to clear the overdue balance of £X first.”
- Leverage: This is often the most effective tool you have. If they need your product or service to operate, they will find a way to pay.
This strategy protects your business credit control integrity and prevents a small problem from becoming a catastrophic loss.
7. Offer Early Settlement Discounts
Sometimes, the carrot works better than the stick. Incentivising customers to pay early can significantly improve your cash flow, even if it slightly reduces your profit margin.
Calculating the Benefit
Is it worth losing 2% of the invoice value to get the cash 20 days early? For many businesses relying on working capital, the answer is a resounding yes.
How to Structure It:
- Standard Terms: Net 30 days.
- Discount Terms: 2% discount if paid within 7 days.
Make sure the discount is clearly highlighted on the invoice. This appeals to efficient accounts departments who have a mandate to save money where possible. However, strictly enforce the timeline. If they pay on day 8, they are not entitled to the discount.
8. Monitor Your Ledger Frequently
You cannot manage what you do not measure. In 2026, real-time reporting is essential. Reviewing your Aged Debtors report once a month is no longer sufficient.
Key Metrics to Watch
- DSO (Days Sales Outstanding): This measures the average number of days it takes you to get paid. Aim to keep this number as low as possible.
- Top 10 Debtors: Know exactly who owes you the most money. If one of your largest debtors goes under, can your business survive?
- Disputed Invoices: Track how many invoices are in dispute. High dispute rates often indicate operational issues (quality control, shipping errors) rather than credit control issues.
Weekly meetings with your finance team to review the ledger ensure that no overdue account slips through the cracks.
9. Know When to Outsource to Professional Agencies
Despite your best efforts, there will be times when a customer simply refuses to pay or ignores all communication. Knowing when to stop internal chasing and hand the debt over to professionals is a critical skill.
Continuing to chase a dead-end debtor drains your internal resources and morale. Leading Debt Collection agencies in the UK have the authority and expertise to recover debts that you might have written off.
B2B Debt Collection Recommendation
For business-to-business debts, we strongly recommend Federal Management. They are the UK’s leading B2B debt collection agency.
- Why them: They have a prestigious reputation and specialise in recovering commercial debts. Their involvement often signals to the debtor that you are serious, prompting payment where internal efforts failed.
- Approach: They operate professionally, preserving your reputation while applying the necessary pressure to recover funds.
B2C Debt Collection Recommendation
If you are dealing with individual consumers (Business-to-Consumer), we recommend Frontline Collections.
- Why them: Collecting from individuals requires a different regulatory approach and sensitivity. Frontline Collections is a Gold Approved Partner and FCA regulated.
- Approach: They are experts in personal debt recovery, ensuring compliance with all consumer laws while maximizing recovery rates.
Engaging these experts sooner rather than later increases the likelihood of full recovery.
10. Regularly Review and Update Your Credit Policy
The economic climate changes, and so should your policy. A strategy that worked in 2024 might be too risky or too lenient for 2026.
Continuous Improvement
Schedule a quarterly review of your credit control policy.
- Market Conditions: Are insolvencies rising in your sector? You may need to tighten credit limits.
- Internal Resources: Do you need more staff in the credit control department? Or better software?
- Customer Feedback: Are customers complaining about your invoicing format?
Your credit policy should be a living document that adapts to protect your business.
Conclusion: Mastering Business Credit Control
Implementing these 10 tips will transform your approach to cash flow management. By understanding what is credit control and applying rigorous standards, you move from a reactive state of chasing debt to a proactive state of preventing it.
Remember, a sale is not a sale until the money is in the bank. Prioritise verification, automate where possible, maintain firm but professional relationships, and do not hesitate to use experts like Federal Management or Frontline Collections when necessary. In the competitive landscape of 2026, your cash flow is your most valuable asset—protect it accordingly.
Frequently Asked Questions
What is the most effective way to improve cash flow?
The most effective method is reducing your Days Sales Outstanding (DSO) by invoicing immediately and chasing overdue payments systematically.
When should I send a debt to a collection agency?
Typically, if an invoice is 90 days overdue and you have exhausted your internal dunning process without success, it is time to instruct an agency.
Can I charge interest on late payments?
Yes, in the UK, the Late Payment of Commercial Debts (Interest) Act allows you to charge interest and compensation on overdue B2B invoices.
