Handbook
The Credit Control Handbook: Cut DSO Without Losing Customers
A practical operating handbook for credit and AR teams — policy, scoring, dunning cadence, KPIs and escalation triggers.
Credit control is a cash function, not an admin function
Every day of DSO ties up working capital. For a business turning over €20m, one day of DSO is roughly €55,000 in cash. Reducing DSO from 62 to 48 days releases close to €770,000 — without a single new sale.
The teams that achieve this are not the most aggressive; they are the most consistent. Policy, cadence and clear escalation beat improvisation.
Score customers before you extend credit
A lightweight 100-point model is enough for most mid-market portfolios. Score at onboarding and re-score annually or on any material event.
- Financial strength (35 pts): filed accounts, equity, liquidity, filing punctuality
- Payment history (30 pts): your own ledger first, then bureau data
- Sector and country risk (20 pts): payment culture and enforcement climate
- Relationship and structure (15 pts): group backing, guarantees, tenure
A dunning cadence that converts
Most invoices are paid when someone asks clearly, in writing, on a predictable schedule. Automate the early steps and reserve human contact for value.
- Day −5: pre-due courtesy confirmation that the invoice is approved for payment
- Day +1: automated reminder with invoice and payment link
- Day +7: second reminder plus a phone call to the AP contact
- Day +14: statement of account and escalation to the commercial owner
- Day +30: formal demand with statutory interest and recovery costs stated
- Day +45: account on stop, prepare handover pack
- Day +60: place with external recovery
The KPIs that matter
Track a small set consistently rather than a dashboard nobody reads.
- DSO and Best Possible DSO (the gap is your addressable opportunity)
- Current Ratio of receivables — percentage of ledger not yet due
- Collection Effectiveness Index (CEI) — quality of collection effort
- Ageing bucket migration month over month
- Dispute rate and average dispute resolution time
Escalating without burning the relationship
Escalation is a process, not a punishment — and saying so to the customer keeps it commercial. Communicate policy thresholds in advance, apply them consistently to everyone, and separate the commercial owner from the collection role so the relationship survives the pressure.
Also in the PDF
Credit policy skeleton
A complete policy outline covering scope, credit assessment, limits, terms, invoicing standards, dunning, payment plans, write-off authority, reporting cadence and compliance.
Dunning message templates
Ready-to-send wording for each stage of the cadence, in a tone that keeps the commercial relationship intact while making the deadline unambiguous.
Handover pack checklist
Exactly what to send an external recovery partner so the file can be worked on day one, with no back-and-forth.
Frequently asked questions
What is a good DSO?
It depends on your terms. Compare DSO against Best Possible DSO — the gap, not the absolute number, is what you can actually fix.
When should an invoice go to external collections?
Most policies escalate at 60 days past due with no agreed plan, or immediately on clear distress signals such as bounced payments or unreachable contacts.
Does chasing harder damage customer relationships?
Inconsistency damages relationships; predictable, policy-based process does not. Customers respect a clear cadence applied to everyone.
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