How to Set Credit Terms for Business Customers

Define your standard terms before quoting

Credit terms should be established in your standard terms and conditions of business, not invented invoice by invoice. Before you quote or accept an order, your customer should know your payment period, accepted payment methods, and consequences of late payment. Ambiguity at the quoting stage is a leading cause of payment disputes.

Common UK B2B terms are 30 days from invoice date, 30 days from end of month, or payment on delivery. Choose a standard that works for your cashflow and state it clearly on every quote, order confirmation, and invoice.

Run a credit check on new customers

Before extending credit to a new B2B customer, check their Companies House filing history — particularly whether accounts are overdue, whether they have any county court judgments registered, and when the business was incorporated. Newly incorporated companies with no filed accounts carry higher risk.

Commercial credit reference agencies such as Creditsafe, Experian Business, or Dun & Bradstreet provide credit scores and payment behaviour data for a modest fee. For larger accounts, this is money well spent. You are entitled to set a credit limit for each customer and decline to extend further credit once that limit is reached.

Put your terms in writing and get them signed

Oral agreements are difficult to enforce. Your terms and conditions should be a written document that the customer explicitly accepts — either by signing an account application form, countersigning a contract, or clicking to accept on your online order portal.

Include: payment period, interest on overdue amounts (referencing the Late Payment of Commercial Debts Act 1998), your right to suspend supply if an account is overdue, a retention of title clause if you supply goods, and your dispute resolution process. Have a solicitor review your T&Cs at least once.

Use tiered terms to reward good payers

You can differentiate credit terms by customer reliability. Long-standing customers with clean payment records might receive 45 days; new or previously slow-paying customers might receive 14 days or payment in advance. This approach reduces risk without turning away business.

Early-payment discounts (for example, 1.5% off if paid within 10 days of invoice) can be effective for larger accounts where the discount cost is less than the financing cost of waiting 30 or 60 days. Assess the net cost carefully before offering them across the board.