Credit control is often misunderstood by small and medium-sized businesses in the UAE. Many confuse it with debt collection or see it as an unnecessary expense.
In reality, effective credit control is one of the most important financial management practices for maintaining healthy cash flow and sustainable growth.
What is Credit Control?
Credit control is the systematic management of your accounts receivable – ensuring you get paid on time for goods and services you've already delivered.
It involves:
- Setting credit terms and limits
- Monitoring customer payment behavior
- Following up on overdue invoices
- Managing customer credit risk
- Maintaining positive customer relationships
Key Difference: Credit control is proactive and relationship-focused, while debt collection is reactive and often adversarial.
Why Credit Control Matters for UAE Businesses
1. Cash Flow is King
In the UAE, cash flow problems are the #1 reason SMEs fail. You can be profitable on paper but still go bankrupt if customers don't pay on time.
Real Example: A Dubai construction company with AED 2M in outstanding invoices couldn't pay suppliers because customers were 60-90 days late. Despite having profitable projects, they nearly went under due to cash flow issues.
2. Growth Requires Working Capital
Want to take on more projects or expand inventory? You need cash. Money tied up in unpaid invoices isn't available for growth.
3. Prevention is Better Than Cure
It's much easier (and cheaper) to prevent payment delays than to chase down seriously overdue accounts.
Cost Comparison:
- Proactive credit control: AED 749-1,799/month (fixed)
- Debt collection agency: 15-30% of collected amount (AED 1,500-3,000 per AED 10K)
- Legal action: AED 5,000-20,000+ in legal fees
The Credit Control Process
Stage 1: Before the Sale (Credit Assessment)
Actions:
- Check customer creditworthiness
- Set appropriate credit limits
- Establish clear payment terms
- Get written agreement on terms
UAE-Specific: Use Aecb (Al Etihad Credit Bureau) for credit checks on UAE entities.
Stage 2: Invoicing (Documentation)
Actions:
- Send accurate, detailed invoices immediately
- Include all required information (TRN, payment terms, bank details)
- Make invoices easy to understand
- Offer multiple payment methods
Compliance Note: Ensure VAT invoices comply with UAE FTA requirements.
Stage 3: Monitoring (Tracking)
Actions:
- Track all outstanding invoices
- Monitor aging (30, 60, 90+ days)
- Identify patterns (which customers pay late?)
- Flag high-risk accounts
Tool: Use accounting software or specialized AR management platforms.
Stage 4: Follow-up (Communication)
Actions:
- Send automated reminders before due date
- Follow up on due date
- Escalate for overdue invoices
- Maintain professional, respectful tone
Cultural Consideration: UAE business culture values relationships – aggressive tactics can backfire.
Stage 5: Escalation (Resolution)
Actions:
- Personal contact from senior team member
- Negotiate payment plans if needed
- Consider mediation or legal action as last resort
- Know when to write off bad debts
Common Credit Control Mistakes
Mistake #1: No Clear Credit Policy
Problem: Ad-hoc decisions lead to inconsistency and unfairness.
Solution: Document your credit policy with clear criteria for credit limits, payment terms, and consequences for late payment.
Mistake #2: Inconsistent Follow-up
Problem: Following up some invoices but not others sends mixed messages.
Solution: Implement systematic follow-up for ALL invoices, regardless of customer size or relationship.
Mistake #3: Waiting Too Long
Problem: The longer an invoice is overdue, the less likely you are to collect it.
Solution: Start follow-up immediately when an invoice becomes overdue. Don't wait 60-90 days.
Mistake #4: Being Too Aggressive
Problem: Threatening language damages relationships and can be legally problematic in the UAE.
Solution: Maintain professional, respectful communication. Focus on problem-solving, not blaming.
Mistake #5: Doing It All Yourself
Problem: As the business owner, your time is better spent on core business activities, not chasing invoices.
Solution: Delegate to a dedicated team member, hire a credit controller, or outsource to a specialist like steady.ae.
DIY vs. Professional Credit Control
When to DIY:
- You have < 10 customers
- Average invoice value < AED 5,000
- Payment terms are 7 days or less
- You have dedicated admin staff
When to Get Professional Help:
- You have 10+ active customers
- Average invoice value > AED 5,000
- Payment terms are 30+ days
- You're spending 10+ hours/week on collections
- You're experiencing cash flow problems
The steady.ae Difference
We provide technology-enabled credit control specifically designed for UAE SMEs:
What We Do:
- Automated Reminders – Professional, timely follow-up in English and Arabic
- Expert Escalation – Bilingual credit controllers for overdue accounts
- Relationship Preservation – Firm but respectful approach
- Complete Visibility – Real-time dashboard showing all invoice statuses
- Predictable Pricing – Fixed monthly fee, no commissions
What We Don't Do:
- We're not a debt collection agency
- We don't use aggressive or threatening tactics
- We don't charge percentage commissions
- We don't damage your customer relationships
Measuring Success
Key metrics to track:
- DSO (Days Sales Outstanding): Average time to collect payment
- Collection Rate: % of invoices collected within terms
- Aging Buckets: % of AR in 0-30, 31-60, 61-90, 90+ day categories
- Bad Debt Ratio: % of invoices written off as uncollectable
Benchmark: Healthy UAE businesses maintain DSO of 30-45 days and bad debt ratio below 2%.
Getting Started
Step 1: Assess your current situation
- How many outstanding invoices do you have?
- What's your average payment delay?
- How much time do you spend chasing payments?
Step 2: Establish credit control policies
- Credit assessment criteria
- Payment terms
- Follow-up process
- Escalation procedures
Step 3: Implement systematically
- Start with new customers
- Gradually apply to existing customers
- Be consistent
Step 4: Monitor and adjust
- Track your key metrics
- Identify what works
- Refine your approach
Ready to Improve Your Credit Control?
Whether you handle it internally or partner with steady.ae, effective credit control is essential for business success in the UAE.
Get a free credit control assessment – we'll analyze your current AR situation and show you exactly how much you could save.
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Questions about credit control for your UAE business? Contact our experts for a free consultation.