Payment terms and credit policy
Clear payment terms support better debtor follow-up and stronger cash discipline.
Payment terms and a simple credit policy shape the whole receivables process. For UK small businesses, sales, invoicing and follow-up should all be working from the same expectations about when and how customers pay.
What should be in place?
- payment terms are clear to the customer
- exceptions are approved deliberately
- follow-up starts on a fixed timetable
- customer risk is reviewed before it becomes a problem
Where do mistakes happen?
| Area | Typical problem |
|---|---|
| Sales | deals are agreed without clear payment rules |
| Follow-up | reminders are sent too late or too inconsistently |
| Risk | one customer builds an exposure that no one challenges |
A practical routine
- Make payment terms part of the standard invoicing process and tie them into Credit control routine .
- Use Aged receivables review to see which customers or terms create the biggest delays.
- Connect credit policy to Cash flow management , so debtor risk shows up in cash planning as well.
- Handle corrections and refunds consistently, so customers receive a clear message.
In summary
Payment terms only help when they are clearly communicated and consistently enforced. That is what turns credit policy into something practical.