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Managing business finances

This fact sheet covers England & WalesWe also have a version for Scotland if you need it.

When you are self-employed, it is very important to manage your income and outgoings carefully. For example, if your customers do not pay you on time, it can be difficult for your business to make a profit. When customers buy goods or services from you but pay for them at a later point, this is known as getting ‘credit’ from you. ‘Credit control’ is a term used to describe how your business:

  • provides credit; and
  • collects money from your customers.

Good ‘credit control’ procedures are very important to help make your business successful.

Use this fact sheet to:

  • set up good credit control procedures;
  • find out about dealing with disputes;
  • understand late payment law; and
  • see what further action you can take if you have not been paid.

The sample letters mentioned in this fact sheet can be filled in on our website.

Good credit control procedures

A good credit control system can help to reduce the number of disputes you have with customers. It will also help to reduce the number of debts that arise. This will help you to run your business successfully.

Customer credit application forms

When new customers request credit from you, ask them to complete an application form so that they provide the following information.

  • The full name of their business, if they trade under any other name and details of who owns and runs the business (if they are self-employed).
  • Their registration number (if they run a limited company).
  • How much credit they want.
  • Full details of who you can contact with questions about payment.
  • Delivery and invoice addresses.
  • Their bank account details including the account name, sort code and account number. This information can be helpful if you need to take action against the customer if they do not pay.
  • At least two trade referees. These references will give you information about how well the customer pays other businesses for the goods and services they use. See the Request for a trade reference sample letter.
  • Consent for a credit reference check to be done. The credit check will give details of any county court judgments (CCJs) registered against the individual or their limited company and details of how long their business has been at its current address.
  • Consent for bank references to be done. The bank will require this written permission from your customer before giving this type of reference to you. Also, you will usually need to pay the bank a fee. Bank references will be useful because you will be able to see if there have been any problems with the account (for example, the bank not paying cheques that the customer has written).

Check that your customer has completed the application form in full. The information it provides will help you to make a decision about whether to give them credit. You may also need to refer to the information if your customer fails to pay.

Further checks

There are a number of organisations who will assess companies for you, to help you decide whether to give them credit (for example Dun & Bradstreet, Equifax and Experian). See Useful contacts at the end of this fact sheet.

You can also obtain copies of a limited company’s accounts and other information from Companies House. This information can be downloaded online or you can pay a small fee to get it sent to you through the post. Go to and search for Companies House.

Some organisations have signed up to the Prompt Payment Code. This is a voluntary code where members undertake to pay 95% of invoices from businesses with fewer than 50 employees within 30 days, or within 60 days if the supplier has 50 employees or more. Organisations that display poor payment practice may have their membership of the code removed or suspended. For more information and to check whether a business has signed up to the code, see the Prompt Payment Code website.

Agree terms and conditions

Ask your customer to agree to your terms and conditions in writing before you supply goods and services to them. This will give you more protection if you need to chase payment from them in the future. Consider covering the following areas in your terms and conditions.

  • The price of the goods and services you are providing.
  • Delivery arrangements.
  • The quality of goods and services that the customer can expect from you.
  • Rules on how payment should be made.
  • Your right to charge interest on late payments and to claim costs for recovering any debt your customer owes.
  • Your right to record information with credit reference agencies about whether your customer pays on time.

If you agree on a payment date, it should usually be a date within:

  • 30 days of the invoice being received if your customer is a public authority; or
  • 60 days of the invoice being received if your customer is not a public authority. You may agree payment terms longer than 60 days, but the terms must be fair for both you and your customer.

If you do not agree a payment date, the law says a payment is late 30 days after either:

  • your customer receives the invoice; or
  • you deliver the goods or provide the service (if this is later than the date your customer receives an invoice).

Termination clauses in supply contracts

From 26 June 2020 the law offers some protections to companies that enter into insolvency proceedings such as administration, liquidation or a company moratorium. If your customer enters into insolvency proceedings, you might not be able to use the insolvency as a reason to stop supplying goods and services, end the contract or vary the contract terms. Contact us for advice on how the new law could affect you.

Disputes about payment

Some examples of possible disputes that your customers may raise about paying their debts are listed below. We have given some tips on how these disputes can be avoided.

“I didn’t receive the goods”

Make sure you get signed delivery notes from customers. Alternatively, get another type of written confirmation that the goods have been received (for example, a confirmation letter or fax). If you need to take court action to deal with the dispute, these documents can be used to support your case.

“Your contract was not with me”

Make sure you know exactly who you are doing business with. If you are dealing with a limited company, it is very important to get its name exactly right. If you are dealing with a sole trader or a partnership, it is important to know the names of the owner or the partners of the business. If certain technical details are wrong, this can sometimes make it difficult to successfully take court action to recover a debt.

"I didn’t order the goods"

Always get a written order from your customer, even if it is a short letter or fax, to prove that they ordered the goods or services in question. These documents can be used to help support your case if you need to take court action to recover a debt.

"The goods were faulty"

If your customer does not pay an invoice on time, send out letters to chase up payment. Ask the customer to explain any complaint they have, and to describe any faults that they have found with the goods or services that you have provided. If they are given opportunities to do this and fail to do so, any complaints made later are not likely to be as strong. You could ask customers to sign and confirm that items are in good order when they are delivered. You could also state in your terms and conditions that they should tell you in writing about any complaints within a certain time after receiving the goods from you.

"Under the terms of the contract, I do not have to pay you"

Make sure that you have a set of terms and conditions that protect you, and which enable you to ask for early and full payment of an invoice. You could print the terms and conditions on the reverse of your order form. Ask the customer to sign to say that they agree with these terms and conditions when the goods are delivered.

Dealing with unpaid invoices

Debt Respite Scheme

From 4 May 2021, individuals in problem debt can apply for breathing space to get some protection from their creditors. This is to give them time to get debt advice and to find a solution for their debt problems.

If your customer applies for breathing space, you will be notified of this by the Insolvency Service. This could be by email, post or by a copy of the notification being left at your address. The notice will tell you what debt has been included in the breathing space and when the breathing space started.

Breathing space usually lasts for 60 days. During the breathing space, you cannot ask for payment and most kinds of enforcement will have to stop.

For more information on breathing space and your responsibilities as a creditor, see GOV.UK.

There are different steps that you can take to help you chase up unpaid invoices. Set aside time on a regular basis to take these steps.

  • Write to the customer after the time for payment has gone by. Ask for payment within a set period (for example, seven days).
  • Write to the customer again after the set period has gone by if payment is not received. Tell them that a final reminder will be sent if they do not pay within a further couple of days. Tell the customer that their account is frozen and that no further credit will be given until the amount owed has been paid.
  • If the customer you are having a payment problem with is a large business, you may be able to get some free help. See the later section Small Business Commissioner.
  • If the customer you are having a payment problem with has signed up to the Prompt Payment Code, you can make a complaint on the Prompt Payment Code website. Your complaint could result in sanctions against the business if the problem is not resolved, including suspension or removal from the code.
  • Consider whether you will charge interest and compensation under the Late Payment of Commercial Debts (Interest) Act 1998. This can be charged on a debt owed by another business to you, even if there is nothing about this in the contract you have with them. You can use the Small Business Commissioner’s tool to calculate the compensation and interest you can charge. If the Late Payment of Commercial Debts (Interest) Act 1998 does not apply, there may be other legislation which allows you to charge interest. Contact us for advice.
  • Send a final reminder or final demand to the customer, giving them at least 14 days to pay before further action is taken. Use our Debt still outstanding after reminders sample letter.
  • If you want to make a court claim against an individual or a sole trader, and there isn't a specific pre-action protocol which applies, you will need to follow the pre-action protocol for debt claims.
  • If your customer responds to your letter by raising a dispute about the debt, the timescales that you should follow may be different. Contact us for advice.

If these steps are not successful, consider taking further action. See the later section What further action can I take?.

Is your customer struggling?

Ask your customer if they are experiencing financial difficulties. If they are, you could consider accepting payment by instalments.

Record keeping

Keep a record of any telephone calls that you make. Also, keep a copy of each letter you send. This will be useful if you do take court action in the future.

Small Business Commissioner

You may be able to get help from the Small Business Commissioner (SBC) if you have a small business and the payment problem you have is with a large business. The SBC is an independent body set up by the Government. The SBC is free to use and can look into complaints and make recommendations to resolve problems. The SBC website has examples of real stories where they have helped businesses get money that is owed to them.

  • Your business will be treated as a small business if it has fewer than 50 employees.
  • Your customer’s business will be treated as a large business if it has 50 or more employees.

You can make a complaint to the SBC about a problem with a payment that:

  • was due within the past 12 months; and
  • you have already tried to resolve with your customer.

The SBC might accept a complaint even if you don’t fit these requirements. For example where:

  • there were deliberate delays by your customer that stopped you complaining within 12 months; or
  • it would have damaged your business if you tried to resolve the problem with your customer.

Complaints the SBC cannot help with

The SBC cannot help if:

  • your customer is a supermarket;
  • your customer is in the public sector;
  • your customer hasn’t paid because they are unhappy with your price;
  • you are in the construction industry and you do not work for a residential occupier;
  • you are currently trying to resolve the problem with legal action, mediation, adjudication or arbitration; or
  • you have already had a legally-binding decision about the problem, for example from a court, arbitrator or adjudicator.

How to complain

You can email your complaint to See the Complain to the Small Business Commissioner webpage for details of what to include in your complaint.

If you cannot complain by email, you can make your complaint by calling the SBC on 0121 695 7770.

The SBC will contact you to let you know if they can take on your complaint or not. If they cannot take on your complaint, they will explain why. If the SBC does accept your complaint, a caseworker will be given your case. The caseworker may ask you for further information. The whole process usually takes four to six weeks.

Any recommendation made by the SBC is not legally binding. This means, if you are not happy with the recommendation, you can still take further action against the customer.

What further action can I take?

Solicitors and debt collection agencies

You could consider using a third party to act on your behalf to recover the debt. This could be a firm of solicitors or a company that specialises in collecting debts (known as a debt collection agency).

The advantages of using a debt collection agency are likely to be:

  • their fees are low compared to solicitors;
  • they can usually deal with matters such as serving legal documents, tracing customers, getting legal status reports and so on;
  • they will visit your customer’s premises and discuss payment if requested; and
  • they can usually deal with all aspects of taking court action.

The disadvantages of using a debt collection agency are likely to be:

  • their staff may not be legally trained; and
  • they usually only deal with undisputed debts.

The advantages of using a solicitor are likely to be:

  • their staff will be legally trained;
  • they have expertise in dealing with disputed debts and coming to agreements with customers; and
  • they will only use legal action to recover debts so this may help you to collect debts quickly.

The disadvantages of using a solicitor are likely to be:

  • they will usually instruct an agent to serve legal documents, trace customers, obtain legal status reports and they could charge you more for doing this;
  • they will not usually visit your customer; and
  • their fees are high compared to debt collection agencies. It is a good idea to agree their fees in advance.

County Court claims

You could ask the County Court to confirm that your customer owes you money. This is done by making a ‘claim’ in the County Court.

  • There are set costs that you have to pay to make a claim.
  • Your customer could admit or dispute the claim. If they dispute it, there will usually be a hearing to decide the case.
  • If you are successful in taking this action, a county court judgment will be made against your customer. This is a court order which states what is owed and how the debt should be paid back (for example, by instalments).
  • If your customer still does not pay, you can take different types of action to get your money back. This is known as ‘enforcing’ the debt.

If you take legal action against someone, this does not necessarily mean that you will be paid. Before taking this type of action, consider whether it is likely to be successful in getting your money back. For example, if your customer does not have any assets or spare income, a county court judgment may not help you to get paid as quickly as you would like. Also, think about whether there is any possible defence to your claim. When someone has a defence, it means that they have reasons to dispute owing all or part of what you have claimed. If you do not consider these things, taking county court action could mean spending further time and money that you cannot recover for a long time.

See our Making a small claim fact sheet for more information.

If a customer enters into breathing space

If you are notified that a customer has entered a breathing space moratorium under the Debt Respite Scheme it means there are certain rules you need to follow. You can find more information in our Breathing space fact sheet and the Debt Respite Scheme (Breathing Space) guidance for creditors.

Customers can include their business debts in breathing space unless at the time they apply:

  • they are VAT registered and the debt relates solely to their business; or
  • they are in a partnership and the debt relates solely to their business.

A limited company cannot apply for breathing space. A director of a limited company can apply for breathing space for their own debts.

If a customer enters into a company moratorium

A moratorium is a legal process companies can use to get temporary breathing space from their creditors. If you receive notice that a customer has entered into a company moratorium, there will be restrictions on taking legal action against the company during the moratorium. The company will still have to continue paying for goods and services that you supply during the moratorium, but it will not have to pay outstanding amounts for past supplies while the moratorium is in place. If you receive notice that a customer has entered into a moratorium, contact us for advice on what this means for you.

Bankruptcy or winding up petitions

If you are owed £5,000 or more, you could consider petitioning for your customer’s bankruptcy.

A bankruptcy order would mean that any assets or property that your customer owns could be sold to help pay off the debts they owe. You would first need to issue a ‘statutory demand’. This is a demand for money drawn up in a set format. There are high fees to pay to make someone bankrupt. Therefore, it is important to know what assets your customer has, and if there are other debts they owe. This will help you to decide if you are likely to recover your money by taking this type of action. See our Bankruptcy fact sheet for more information.

If your customer runs a limited company, the process is know as presenting a 'winding up petition'. In most cases, a company can be wound up if it owes more than £750. If you are considering this option, contact us for advice.

Other fact sheets that may help you

Bankruptcy fact sheet

Breathing space fact sheet

Making a small claim fact sheet

Useful contacts

Companies House Phone: 0303 123 4500

Dun & Bradstreet Phone: 0800 001 234 Email:

Equifax Ltd For seeking information about individuals. Phone: 0845 603 6772

Equifax Ltd For seeking information about other businesses. Phone: 0800 014 2955

Experian Phone: 0844 481 9914