A credit control policy is a written set of rules that decides who gets credit, on what terms and limit, when each overdue stage starts, and who can write off a debt. The blank Word template and the filled-in UK example below carry every section, with the chasing table behind both.
Summary
- The files: two downloads, no sign-up: the blank 13-section policy in Word with square-bracket fields, and the same policy filled in for a UK supplier on 30-day terms as a PDF.
- The schedule: a reminder 3 days before due, then days 1, 7, 14 and 30 after; credit hold at day 31; letter before action, agency or county court claim from day 60.
- UK interest: statutory interest is 8% over the Bank of England base rate (11.75% with Bank Rate at 3.75%), plus a fixed sum of £40, £70 or £100 on each overdue invoice.
You are probably here because a customer is past 60 days and nobody owns the call. The Small Business Commissioner treats 30 days from invoice as the typical UK term, and when no date was agreed the law calls a payment late 30 days after your customer receives the invoice, or after delivery if that is later.
A policy turns that into dates, names and actions. Here is what to put in it, section by section.
What is a credit control policy?
A credit control policy is the written document that tells staff how your business gives credit and collects what it is owed, from the first credit check to the final write-off.
- Who gets credit: a credit application, a credit check with Experian, Creditsafe or Dun & Bradstreet, and trade references for larger limits.
- On what terms: a credit limit per customer, payment terms of 14, 30 or 60 days, and who has delegated authority to change them.
- When each overdue stage starts: a reminder schedule with fixed day counts, a credit hold trigger, and the point you hand a debt to a debt collection agency or the county court.
- What it costs the customer: statutory interest at 8% over the Bank of England base rate, plus the £40, £70 or £100 fixed sum, unless your contract sets a different remedy.
- Who can write off: approval tiers for a bad debt write-off, and how the aged debt report and debtor days are reviewed each month.
Some firms call the same document a debt collection policy, a credit management policy or an accounts receivable policy; the contents are the same. The Chartered Institute of Credit Management (CICM) lists a written credit policy, available to all staff, as its first best practice in credit management.
What should a credit control policy include?
A credit control policy should include 13 sections, from purpose and scope through to reporting and review, with the chasing schedule and the write-off authority written as numbers and job titles. The template follows this order.
| Section | What to put here |
|---|---|
| 1. Purpose and scope | One sentence of purpose (the rules for giving customers credit and collecting what they owe), who must follow it, who owns it, when it is reviewed. |
| 2. Roles and delegated authority | Who approves limits and write-offs at each value band, by job title. |
| 3. New customer credit checks and application | Application form, credit reference agency, trade references, re-check triggers. |
| 4. Credit limits and approval tiers | How the opening limit is set and what a breach does. |
| 5. Payment terms | Standard terms (Net 14, 30 or 60; 30 days is the UK norm), who can vary them, payment methods, your right to charge interest. |
| 6. Invoicing standards | How soon invoices go out; required fields: PO number, due date, terms, bank details. |
| 7. Chasing schedule | The day-count table: each reminder, call and demand, its owner, the credit hold day. |
| 8. Late payment interest and recovery costs | Statutory interest under the Late Payment of Commercial Debts (Interest) Act 1998, the fixed sums, when invoiced or waived. |
| 9. Credit hold | The trigger, who releases it, how one disputed invoice is handled. |
| 10. Disputes and queries | Logging and resolution timescales; the undisputed part stays due. |
| 11. Payment plans | Maximum length, who approves, written confirmation, missed-instalment rule. |
| 12. Bad debt write-off and provisions | Write-off triggers, approval tiers, VAT bad debt relief, provision against old balances. |
| 13. Reporting and policy review | Monthly aged debt report, debtor days (DSO), share of debt over 60 days, annual review. |
If your business holds a Fair Payment Code award as a buyer (the code replaced the Prompt Payment Code), say so in section 1.
How do you chase overdue invoices under the policy?
You chase overdue invoices under the policy by running one fixed schedule on every overdue invoice: reminders, a call and a formal demand on set days, then credit hold and escalation.
Section 7 of the template. The red step is the credit hold. Reminders stop the moment the invoice is paid.
The day-count chasing table
| Day | Action | Owner | Credit hold |
|---|---|---|---|
| 3 days before due | Courtesy reminder by email with a copy of the invoice. | Credit controller | No |
| Day 1 overdue | First overdue reminder by email. | Credit controller | No |
| Day 7 | Phone call to the accounts payable contact. Log the promise to pay. | Credit controller | No |
| Day 14 | Formal reminder stating statutory interest and the fixed sum. | Credit controller | No |
| Day 30 | Final demand by email and post with a seven-day deadline. | Finance manager | No |
| Day 31 | Credit hold on the account. New orders need finance approval. | Finance manager | Yes |
| Day 60 | Letter before action, then a debt collection agency or a county court claim. | Finance director | Yes |
Example schedule for 30-day terms (software calls it the dunning sequence); move the day counts to fit your terms. The Small Business Commissioner's unpaid invoice ladder runs the same way. The hold starts at day 31 even though the final demand's seven-day deadline runs to day 37.
Keep the wording for each step in a shared template; our overdue invoice email templates cover each stage, and our guide on how to chase overdue invoices covers the phone calls. Claims under £10,000 in England and Wales run on the county court small claims track.
What is credit hold, and when should you use it?
Credit hold is the point in the policy where a customer with an overdue balance can no longer place orders on credit until the balance is cleared or a payment plan is signed.
Use a fixed trigger. The template sets two: any invoice 31 days overdue, or a balance above the credit limit. Three rules keep it fair:
- One disputed invoice does not freeze the account. While the dispute is logged and inside the timescale in section 10, the rest of the account trades as normal.
- Only one job title releases it, in writing. That stops sales from lifting a hold to land an order.
- A signed payment plan lifts the hold. A verbal promise to pay does not. A missed instalment restarts the schedule from day 1.
How should the policy handle late payment interest?
The policy should state that statutory interest and the fixed recovery sum apply to every overdue invoice under the Late Payment of Commercial Debts (Interest) Act 1998, and name the day they are invoiced and who may waive them.
The Act gives every business-to-business contract an implied right to simple interest at 8% a year over the Bank of England base rate. The base rate used is the one in force on 30 June or 31 December, and it applies to interest that starts in the following six months.
With Bank Rate at 3.75%, the statutory rate is 11.75%.
Fixed sum per invoice: under £1,000: £40; £1,000 to £9,999.99: £70; £10,000 or more: £100.
The fixed sum is charged once per invoice. If your reasonable recovery costs are higher, you can claim the difference. Check the current figures on gov.uk each time you review the policy.
A gov.uk press release gives this example: a £10,000 invoice paid 60 days late carries £193.15 of interest plus the £100 fixed sum, £10,293.15 in all.
What to write in section 8
- Your contract can replace the statutory rate only if it is a substantial remedy. A token rate is void and the statutory rate applies instead.
- Invoice it separately. Gov.uk and the Small Business Commissioner both say to raise a new invoice for the interest and fixed sum.
- Waive deliberately. Apply the charge on every invoice at day 14; one named role may waive it for a customer who then pays.
The Commercial Payments Bill is going through Parliament and is not yet law. It would make base rate plus 8% mandatory and cap payment terms at 60 days when large firms pay smaller suppliers. Our guide to late payment fees in the UK covers the wording to put on invoices.
What are the three types of credit policy?
The three types of credit policy are restrictive, moderate and liberal, and they differ in how much credit risk the business accepts in return for sales.
- Restrictive: full credit check and trade references first, low limits, 14-day terms, credit hold on the first overdue invoice. Lowest bad debt, slowest sales growth.
- Moderate: a credit check for every new account, limits from the agency recommendation, 30-day terms, the day-count schedule above. The template and example use this.
- Liberal: credit on application, higher limits, 60-day terms, escalation after day 60. Highest sales reach, highest bad debt provision.
Pick the type that matches your margin: a high-margin business can carry more bad debt than a thin-margin distributor.
Credit control policy example (filled-in UK policy)
The example policy is written for Example Supplies Ltd, a fictional UK trade supplier on 30-day terms, with every square-bracket field filled with a number or a job title. The full example is the PDF download; the choices that matter are below.
Example Supplies Ltd: credit control policy, key terms
Fictional company; one reasonable set of choices, not advice.
- Credit check
- Creditsafe report and two trade references before any account opens; re-check on a limit request, after two late payments in six months, or every 12 months.
- Opening limit
- The lower of the Creditsafe recommended limit and one month's expected purchases, recorded in Xero.
- Limit approvals
- Up to £5,000 credit controller; £5,001 to £25,000 finance manager; above £25,000 finance director.
- Disputes
- Logged within two working days, resolved within 10 working days. The undisputed part stays due. Interest and the fixed sum are not charged on an invoice that is paid late because of a dispute.
- Payment plans
- Up to six months, finance manager approval, confirmed in writing. A missed instalment makes the whole balance due.
- Write-offs
- Up to £500 finance manager; £501 to £5,000 finance director; above £5,000 the board. VAT bad debt relief claimed six months after the later of the due date and the supply date, once the debt is written off.
- Provision
- 50% against balances over 90 days, 100% over 180 days, reviewed quarterly.
- Reporting
- Monthly aged debt report, DSO and share of debt over 60 days. Targets: DSO under 40 days, under 5% of debt over 60 days.
Every approval has a value band and a job title. The monthly aged debt report and debtor days then show whether the schedule is working.
In a business with one finance person, collapse the tiers: the bookkeeper approves up to a set value and the owner approves everything above it, with the same value bands.
Adapting the policy for councils, schools, charities and the NHS
Councils, schools, charities and NHS bodies adapt the same 13 sections by swapping the approval tiers for their governance structure and by separating business debts, where statutory interest applies, from debts owed by individuals, where it does not.
- Approval tiers become committees. Full council, the trust board or the audit committee holds write-off authority above a set value; reference the delegation scheme in section 2.
- Scope splits in two. The 1998 Act covers business-to-business contracts only, so section 8 applies to trade invoices, never to residents, parents or patients.
- Hardship and vulnerability rules go in section 11, with the point at which recovery pauses and when a debt goes to an agency.
How to run the schedule in Xero or QuickBooks
You run the schedule in Xero or QuickBooks by connecting a credit control tool that sends each reminder on the day in section 7 and applies the interest in section 8.
Chaser
Choose Chaser if you want reminders, collections and credit checks in one UK platform and your revenue sits inside the band your plan allows.
Reminder-led credit control for Xero, QuickBooks Online, Sage and larger ERPs. Chaser's Compact plan is from £199 a month, for businesses under £4m revenue.
Reminders can go from your own Gmail or Outlook inbox. Late fees run as one global rule and sync to the ledger as a line item on Xero only.
Credit Hound
Choose Credit Hound if you run Sage or Xero, chase by phone and log disputes, and add interest manually or not at all.
Credit Hound's Xero pricing is £51 a month for the first user and £35 for each extra user.
Covers dispute logging with notes, promise-to-pay tracking and automatic account freezes. No QuickBooks Online connector and no published function for statutory interest or the fixed sums.
Paidnice
Choose Paidnice if you want the day-count schedule, statutory interest and statements to run on Xero or QuickBooks, priced by invoice volume, not revenue.
Accounts receivable automation for Xero and QuickBooks Online. Paidnice Essentials starts at £49 a month; free sign-up with no card.
Late fees post to the ledger as invoices: a Bank of England base rate option locks the rate for each six-month period, and a fixed-sum line carries the £40, £70 or £100.
Satago
Choose Satago if you want credit checks and reminders from one UK supplier, send under 100 reminders a month, and may want invoice finance.
Credit control plus credit risk data and invoice finance for Xero, QuickBooks, Sage, KashFlow and FreeAgent. Satago's Basic plan is £45 a month with 100 email reminders.
Every plan includes credit reports and limit suggestions, so it covers section 3 as well as section 7.
Whichever you pick, copy the day counts from section 7 into the tool. Our review of the best credit control software UK compares them on statutory interest and reviews.
Frequently asked questions
These credit control policy questions come up alongside the template; the answers use the example above: 30-day terms, reminders on days 1, 7, 14 and 30, credit hold at day 31, statutory interest at 8% over base rate.
Can you give me an example of a credit policy?
Yes. Example Supplies Ltd, above: 30-day terms, a Creditsafe check before credit opens, reminders on days 1, 7, 14 and 30, credit hold at day 31, interest invoiced from day 14, board approval for write-offs above £5,000. The PDF is the full version.
What are the three main components of a credit policy?
Three components make up a credit policy: credit standards (who qualifies: sections 3 and 4), credit terms (limit and days to pay: section 5) and collection effort (schedule, interest and escalation: sections 7 to 11).
What does credit control do?
Credit control decides who gets credit, sets limits and terms, invoices accurately, chases overdue invoices on a schedule and escalates the ones that stay unpaid. The policy is the written version of that job; the credit control process is how it runs day to day.
Is a credit management policy the same as a credit control policy?
In practice, yes. Credit management policy and accounts receivable policy are other names for the same document; the template covers all three.
What are the features of a good credit policy?
The features of a good credit policy are reminder days, approval value bands by job title, the credit hold trigger, the statutory rate and fixed sums, and the metrics the board sees monthly. If a new starter cannot act on a section without asking, rewrite it.
What is credit policy in financial management?
In financial management, credit policy is the trade-off between extra sales from giving credit and the cost of carrying debtors and bad debt. Restrictive, moderate and liberal are the three positions on it.
The bottom line
A credit control policy works when every stage has a day count, a value band and a job title. Fill in the template, state the statutory terms (8% over the Bank of England base rate plus the £40, £70 or £100 fixed sum), publish it to everyone who sells or invoices, and run the same schedule on every overdue invoice.
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