Summary
- When to automate: The signs that your existing debtor management process needs automation to be effective.
- Why to automate step-by-step: Credit control is delicate and automating in stages reduces the risk of errors.
- The five steps of automation: Connect your invoices, set your policies, draft but don’t send, send and monitor, handle the replies.
- Keep some things manual: Some parts of credit control - dealing with disputes, phone calls, when a customer is struggling to pay - will always need a human touch.
- Finding the right tool to automate: What to check for, from Xero sync to reply handling, and where to go for a full comparison of the options.
When to automate credit control
Most businesses start debtor management based on checking Xero’s aged receivables report every few weeks. This generally works until you hit one or more of the following signs:
- Chasing takes more than an hour a week. Your time could be better spent.
- Email reminders are becoming inconsistent. Consistency is crucial in credit control.
- You’ve lost visibility. No one is quite sure which invoices have been chased or not.
- You’re re-doing work each month. Perhaps re-calculating late fees. Perhaps copy/pasting the same email. Time to automate it once and for all.
If two or three of these sound familiar, it’s worth automating. If none do, Xero’s free reminders and a tidy spreadsheet are still doing their job. Here’s a fuller breakdown of when to make the switch.
Why to automate credit control in stages
Credit control is delicate. It combines information from three places to do the job:
- Your accounting software - which invoices are overdue
- Your brain - all unique customer context (in bigger companies this is a CRM)
- Your email - who should be emailed when
Essentially, this guide walks through plugging each system into one credit control process. By doing this in stages, you keep the risk of missing something down. Furthermore, if something isn’t working, you can see which data source is causing the problem.
The five steps of credit control automation
These five steps cover how to automate credit control using your chosen tool. For which software to use, jump to finding the right tool.
Step 1: connect your invoices
Connect your accounting system to your chosen credit control tool and let your invoices and payment history import. Everything overdue shows up automatically, in one place, in sync with Xero or QuickBooks.
This is where you see how big your problem is and which customers or accounts to prioritise.
Step 2: set your policies
This is where you can configure your chosen software based on how you run the process offline, i.e., a brain dump. Here are a few of the options you can configure in most tools:
- When chasing starts. Before the due date, on it, or a few days after.
- How often you chase and for how long. Every week, every month, only on Tuesdays.
- Your tone. Most software gives you the chance to set your email tone from friendly to firm.
- Any exceptions. There will be customers you’d rather handle personally.
- When you charge late fees. If at all.
- When to escalate to a phone call. This is useful if emails aren’t getting responses.
Once your tool is configured, it’s time to connect the final system: your email.
Step 3: draft but don’t send
It’s important to connect your business Gmail or Outlook because emails asking for money from an address your customers don’t recognise are a surefire way to get ignored.
Once you’ve added a sender address, put your tool into ‘manual’ mode. This means the system drafts emails chasing invoices based on your policies, automating email preparation.
However, it won’t send anything without your approval. Once you read the drafted emails, you can press send on the ones you are happy with.
Some businesses with particularly sensitive customers stay at this stage forever. You still get the time back from writing the same email repeatedly, but nothing reaches a customer without you approving it.
Step 4: send and monitor
Once you trust what’s being drafted, routine chasing can run on its own, with exceptions: your largest accounts, anyone in dispute, and anyone you’d rather call can be excluded or kept on manual send.
At this point, you have automated the whole process up to sending the first reminders. Virtually all credit control tools offer this level of automation. The final layer - handling replies - is rarer.
Step 5: handle the replies
Sending emails is the first half of the work. The other half is what happens when a customer replies, and each piece of it can be automated:
- A customer says they’ll pay on a date. That should automatically set an expected payment date, pause chasing until then, and pick it back up if the date passes. You can even have it read the date straight out of their email, and use those dates to forecast when cash will actually arrive.
- An invoice goes far enough past due that you want to charge for it. UK businesses can charge statutory interest and a fixed recovery fee, and it can be calculated and raised automatically.
- A customer can’t pay it all at once. A payment plan can be agreed and then chased as instalments, rather than tracked in your head.
- Chasing isn’t working and someone internal needs to know. Alerts to the account owner or sales, so the whole team can see what’s overdue without anyone needing to ask.
Every one of those is a small manual job, but taken together they start to add up. Automating them one by one means the process starts running fully autonomously.
Keep some things manual in your credit control
Some things do more harm than good when automated. The following things will always need a human touch:
- Anything in dispute, where an automated chaser makes you look like you’re not listening
- Phone calls. Some vendors offer AI calls, but these can backfire if done insensitively
- Customers you know are struggling, who may need reassurance or an exception
These are areas to spend more time when you or your team is freed up from the routine work.
Finding the right tool to automate
The five steps above work with almost any credit control tool. What differs between them is how much of steps 4 and 5 they can actually do for you.
At minimum, look for:
- Xero sync, so overdue invoices and payments update automatically in both directions.
- Draft mode, so you can run step 3 for as long as you want before switching sending on.
- Per-customer exceptions, so your largest accounts or anyone in dispute can be excluded from the default sequence.
- Reply handling, at least for expected payment dates, so a customer’s promise to pay doesn’t get lost in an inbox.
Beyond that, it comes down to budget and how much of the reply-handling in step 5 you want the tool to take on, from late fees to payment plans to statements. Our guide to choosing credit control software covers the options on the market and how to pick between them.
Frequently asked questions
Will automated chasing annoy my customers? Not if it’s set up well. What annoys customers is a robotic email arriving five times in identical form, or a chaser for an invoice they’ve already queried. Varying the wording, excluding anyone in dispute, and pausing when someone tells you a payment date solves most of it.
Can I automate the work but still send the emails myself? Yes, and it’s how we’d suggest starting. The system drafts everything and you review and send. Plenty of businesses run this way permanently.
How long does it take to set up? Connecting your accounting system is a few minutes. Getting your schedule and templates right is an afternoon, plus a week of watching what it would send before you turn sending on.
Should I automate late payment fees? You can, but most businesses prefer these to be raised as a draft they approve rather than sent automatically, because charging interest is a relationship decision. See our guide to UK late payment fees.
Do I need software, or can I automate credit control in Xero? Xero has built-in reminders which are free and a reasonable starting point. They apply one schedule to every customer, cap out at five reminders, and send from a Xero address. Here’s how they work and where they stop. Once you need different treatment for different customers or want to handle what comes back, you need a dedicated tool. Our guide to choosing credit control software covers the options.
