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What is Credit Control? Reduce Risk & Improve Cash Flow

• 13/03/2025
• Paul Atkinson

Effective credit control is no longer just an administrative task — it’s a strategic priority for UK businesses seeking to protect cash flow, reduce credit risk, and support sustainable growth. With many SMEs owed significant unpaid invoices, poor credit control can directly threaten financial stability and growth.

With 77% of SMEs currently owed money by late-paying customers, and average unpaid invoices ranging from £8,400 to over £22,000 depending on company size, poor credit control is directly threatening cash flow and growth.

This complete guide explains what credit control is, why it matters for UK companies, proven strategies to reduce risk, and tools you can use to strengthen your cash flow and credit management performance.

What is Credit Control?

Credit control involves assessing the creditworthiness of customers and suppliers to determine their ability to pay on time. It also includes proactive processes such as implementing payment plans, setting credit limits, and monitoring accounts receivable to minimise the time between delivering goods or services and receiving payment.

Strong credit control enables businesses to protect themselves from risky debtors, maintain healthy cash flow, and build confidence with lenders and partners.

Why Credit Control Matters for UK SMEs

 

• Effective credit control is crucial for managing working capital. Without it, businesses may face:
• Rising debtor days (average time to get paid)
• Unpaid invoices that undermine cash flow
• Increased credit risk exposure
• Weakened ability to invest or grow

For many UK companies, unpaid invoices can average several thousand pounds per customer — a risk that can derail operations if managed poorly.

Top Credit Control Strategies to Improve Cash Flow

Here are practical steps UK businesses should adopt:

1. Set Clear Credit Policies: Create clear rules for offering credit — including limits, approval processes, and review periods — based on each customer’s creditworthiness and payment history.
2. Conduct Thorough Credit Checks: Before extending credit, check business credit reports from reputable providers like CoCredo to assess risk and set appropriate terms.
3. Define Payment Terms Clearly: Communicate payment terms (e.g., Net 30, Net 60) at the start of engagement. Ensure customers understand due dates and late fees.
4. Invoice Promptly and Accurately: Issue invoices immediately after service delivery, with clear due dates and contact details to reduce query delays.
5. Encourage Early Payments: Offering small early payment discounts can incentivise clients to pay on time — boosting your cash flow.
6. Maintain Open Communication: Be proactive in discussing payments. Understanding customer challenges early can prevent late payments from escalating.
7. Negotiated Payment Plans: If a customer is struggling, negotiate a structured payment plan that protects both parties.
8. Plan for Bad Debt: Set up reserves for potential bad debts so your business isn’t caught off guard by defaults.

These strategies build a resilient credit control process that protects your business’s financial foundation. By implementing these strategies, companies can reduce credit risks and ensure a healthy cash flow to support their growth and stability. 

How to Identify and Manage Credit Risk

Use tools like company credit reports and credit monitoring services to monitor changes in a customer’s financial profile, such as payment history, financial strength, or County Court Judgments (CCJs). Acting early on risk signals improves your ability to protect cash flow.

Modern credit control isn’t manual chasing — it’s about leveraging:

• Automated monitoring systems
• Regular business credit checks
• Alerts for financial status changes

These tools help you react quickly and make informed credit decisions based on real data.

Measuring Success: Credit Control KPIs

Track key performance indicators like:

• Average debtor days
• Percentage of overdue invoices
• Bad debt ratio
• Cash conversion cycle

Regular review helps you refine credit policies and improve outcomes.

Conclusion: Stronger Cash Flow & Reduced Risk

Credit control is essential for UK businesses, helping reduce risk, improve cash flow, and support growth. By adopting effective strategies and using tools like credit reports and monitoring, you can make proactive decisions that protect your bottom line.

Talk To Us

Having strong business credit is essential for maintaining financial stability and driving growth. Just as individuals have personal credit scores, companies also have credit profiles that reflect their creditworthiness and overall financial health.

This is where business credit checks become vital. Company credit checks evaluate a business’s financial history, payment habits, and risk profile. These insights allow creditors, suppliers, and partners to make informed decisions and minimise exposure to bad debt.
 
For over 20 years, CoCredo has been a leading provider of online business credit reports, financial data, and company information for businesses in the UK, Ireland, and internationally. 
Our expertise was recently recognised with a Technology Development Award at The CICM British Credit Awards 2025, and we have been one of the leading providers of online business credit reports, highlighting our commitment to safeguarding businesses from financial risk.
 
Our UK and International business credit monitoring service delivers regular email alerts on changes, including financial performance, payment history, County Court Judgments (CCJs), and more. With 12 months of continuous monitoring, you gain real-time insights into a company’s financial health, enabling proactive decisions to protect your own business.

Take advantage of a free company credit report today. Contact us at 01494 790600 or email us to learn how our business credit check and monitoring services can reduce credit risk, improve cash flow, and boost productivity.

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