How to Reduce Debtor Days: A Practical Guide for UK Businesses

First, measure the number honestly

You cannot manage what you have not measured. The quick method: take everything customers currently owe you, divide by your annual invoiced sales, and multiply by 365. If your terms say 30 and the answer says 55, you have found 25 days of your own cash to go and collect. Measure it monthly, because the number drifts the moment attention wanders. Our working capital calculator will show you what those days are worth in trapped cash, which tends to concentrate the mind wonderfully.

Stop the problem at the front door: credit-check before you extend terms

Slow payment is often decided before the first invoice is raised, at the moment you agreed terms with a customer you knew nothing about. Credit-check new business customers, set a credit limit you would be comfortable losing sleep over, and review the limits of existing customers annually, because last year's sound customer is sometimes this year's problem. Businesses are routinely more careful lending £500 to a friend than £50,000 of trade credit to a stranger with a nice website.

Make your invoices impossible to sit on

A remarkable share of late payment is really invoice friction wearing a disguise. Invoice the same day the work completes or the goods deliver, not at month end, since every day of delay is a day added to your debtor number before the clock even starts. Get the details right first time: correct entity, purchase order number, the named contact in accounts payable, clear payment terms and bank details. Large customers' payment runs reject imperfect invoices without telling you, and you discover it 40 days later. Send invoices electronically to the accounts inbox, not to the buyer who commissioned the work, and ask every new customer one question that pays for itself endlessly: "what does your accounts team need from us to pay on time?"

Chase systematically, not emotionally

The businesses that get paid fastest are not the fiercest, they are the most boringly consistent. A simple rhythm works: a polite confirmation a few days after invoicing that everything is in order, a reminder shortly before the due date, a call, not an email, the day after it passes, and monthly statements throughout. The tone stays warm and the rhythm never breaks, because accounts departments quietly triage suppliers into those who chase and those who can wait, and the entire game is being in the first list. If nobody in your business owns this job by name, it is not a system, it is a hope.

Make paying easy, and consider making it attractive

Remove friction at the paying end: payment links on invoices, card options for smaller amounts, direct debit for repeat billing. Some businesses offer a small early settlement discount, which works but costs real margin, so price it deliberately rather than desperately. You also have statutory rights under the Late Payment of Commercial Debts (Interest) Act 1998, which gives businesses a statutory right to interest and fixed compensation on overdue B2B invoices. Most businesses wield it rarely for relationship reasons, but a line on your terms noting the right exists has a way of improving behaviour on its own.

When the problem is structural, fix it structurally

Here is the honest limit of all the above. Good process might claw back 10 or 20 days, but if your customers are large firms on 60 or 90 day terms, no reminder rhythm changes their payment policy, because slow payment is not their oversight, it is their working capital strategy, funded by you. At that point the question stops being "how do we chase harder?" and becomes "why are we lending to them interest-free at all?" Invoice finance answers it structurally: a funder advances most of each invoice's value within about a day of raising it, and your customers' terms become their problem rather than your overdraft's. With factoring, the funder's credit control team also takes over the chasing, doing professionally and persistently everything described above, which for many small businesses beats building the function in-house. What it costs and how it works are covered in our costs guide and what is invoice finance guide.

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