If you extend credit terms, Net 15, Net 30, Net 60, then you’re not just selling products or services. You’re also running a mini finance operation. And the moment customers start paying late, your growth becomes a cash flow problem. That’s why credit collection isn’t something you “deal with later.” It’s a system you build so your business gets paid predictably, without constant chasing.
This guide breaks down credit collection from the ground up: how to prevent late payments, how to follow up effectively, what to say (and what not to say), and when to escalate to professional help.
What “credit collection” really means
Credit collection is the process of recovering payment from customers who purchased under credit terms. It includes:
- Preventing delinquency before it starts
- Sending invoices correctly and on time
- Reminding customers before and after due dates
- Resolving disputes quickly
- Escalating delinquent accounts with structure
The best credit collection programs don’t feel aggressive. They feel organized. Customers pay faster when your process is clear.
The biggest reasons customers don’t pay on time
Most delinquency falls into a few buckets:
- Process issues (wrong invoice, missing PO number, incorrect contact, invoice never received)
- Approval delays (AP backlog, manager sign-off, budget release)
- Disputes (work not approved, scope unclear, “we had issues”)
- Cash-flow problems (they don’t have the funds)
- Habitual slow pay (they pay everyone late because they can)
Your credit collection strategy should identify which bucket applies and respond accordingly.
Step 1: Build strong terms before you extend credit
Credit collection starts at onboarding. Before you offer terms, tighten:
- Payment terms (Net 15/30/45, etc.)
- Late fee policy (if you use it)
- Dispute window (how quickly they must raise an issue)
- Accepted payment methods (ACH, card, check)
- Stop-work / credit hold policy
If your terms are vague, customers will stall. If your terms are clear, your credit collection conversations are easier because you can point to the agreement.
Step 2: Invoice like you want to get paid
A shocking number of late payments are caused by invoice errors. A clean invoice includes:
- Correct legal name and billing address
- Correct email for accounts payable
- PO number and job reference (if applicable)
- Clear line items and totals
- Due date and payment instructions
- A statement of terms (brief, readable)
Then send invoices immediately. The longer you wait to invoice, the longer it takes to collect.
Step 3: Use a predictable follow-up cadence
Credit collection is about consistency, not emotion. Here’s a practical schedule you can adapt:
Before due date
- 7 days before: “Friendly reminder—invoice due next week”
- 2 days before: “Confirming we’re on track for payment on 2026”
After due date
- Day 1: Polite reminder + resend invoice
- Day 7: Reminder + phone call or escalation to decision-maker
- Day 14: Past-due notice with a firm deadline
- Day 21–30: “Final notice” tone, request commitment date
- Day 45–60: Escalation warning / prepare for third-party recovery
This is simple, but most businesses don’t do it. They send one reminder, then go silent for weeks. Silence trains customers that deadlines don’t matter.
Step 4: Make it easy to pay
Friction kills recovery. Improve credit collection rates by offering:
- ACH transfer details on every invoice
- Card payments (if fees make sense for your margins)
- Online payment links
- Clear “payable to” details for checks
If customers have to ask, “How do I pay this?” your collection timeline expands.
Step 5: Handle disputes fast (or they will become excuses)
Disputes are normal. The key is controlling them. Your goal is to prevent “fake disputes” that are actually payment delays.
A strong approach:
- Ask for the dispute in writing
- Request specifics: what line item, what deliverable, what date
- Set a resolution timeline (“We will respond within 48 hours”)
- If a portion is undisputed, ask them to pay the undisputed amount now
In credit collection, unresolved disputes become permanent delays. Close the loop quickly.
Step 6: Segment your customers by risk
Not every customer deserves the same credit terms. Segment into:
- Reliable payers (low follow-up needed)
- Slow but consistent payers (tight reminders, firm deadlines)
- Chronic late payers (reduced terms, deposits, credit limits)
- High-risk accounts (COD, milestone billing, or no terms)
Credit collection improves when you stop treating every customer the same.
Step 7: Track the metrics that matter
If you want better credit collection results, watch:
- DSO (Days Sales Outstanding)
- % of invoices paid on time
-
Aging buckets (0–30, 31–60, 61–90, 90+)
- Dispute rate and dispute resolution time
- Recovery rate on past-due accounts
The goal is to move invoices out of the 60+ days past due category. That’s where debts become expensive.
Step 8: Know when to escalate
Your internal team should not chase forever. Consider escalation when:
- The account is 60–90+ days past due
- The customer won’t commit to a payment date
- You’ve stopped getting responses
- The debtor uses repeated excuses without progress
- The balance is large enough to justify third-party support
Escalation isn’t “being mean.” It’s protecting your business.
When professional help makes sense
If credit collection is draining your time, a professional partner can:
- Apply consistent outreach
- Keep communication professional
- Negotiate payment plans and settlements
- Reduce internal stress and time waste
If you’re considering a partner, JMH Collections can support structured recovery while you stay focused on operations.
Closing
Great businesses fail because cash flow fails. A disciplined credit collection system keeps revenue predictable and reduces write-offs. Start with strong terms, invoice correctly, follow up consistently, resolve disputes quickly, and escalate when it’s clear internal reminders aren’t working. The goal isn’t conflict, it’s clarity and payment.
