Days Sales Outstanding (DSO)
In short: The average number of days it takes to get paid after you invoice. Lower is better; a rising DSO means cash is getting stuck.
Days Sales Outstanding is the average time between raising an invoice and the money landing. The usual formula is (accounts receivable / total credit sales) × number of days in the period. A DSO of 45 means, on average, you wait about 45 days to be paid. Watch the trend more than the absolute number: a DSO creeping up month on month is cash quietly getting stuck, and it is the single clearest signal that chasing needs to become a system rather than an afterthought.
Dunning
In short: The systematic process of contacting customers to collect overdue payments.
Dunning is simply the structured process of chasing money you are owed: a sequence of reminders, escalating in tone, sent on a schedule rather than whenever you remember. A dunning cycle might be a friendly nudge before the due date, a reminder on the day, then firmer follow-ups at set intervals. The point is consistency. For how to word each stage, see how to chase a late payment politely.
Aged debtors report (aged receivables)
In short: A breakdown of what you are owed, grouped by how overdue each amount is.
An aged debtors report (also called aged receivables) lists everything customers owe you, bucketed by age: current, 1 to 30 days overdue, 31 to 60, 61 to 90, and 90-plus. It is the first place to look to see where cash is stuck and which accounts have drifted furthest. Xero and QuickBooks both produce one. Kelo reads the same data read-only from Xero or QuickBooks and, instead of a static list, names the single account worth chasing first.
Credit control
In short: The whole practice of deciding who you extend credit to and making sure they pay on time.
Credit control covers everything from agreeing payment terms up front, to setting credit limits, to chasing overdue invoices and escalating when needed. In a large company it is a dedicated role; in an owner-run business it is usually the founder, squeezed in between the actual work. That gap is exactly where money leaks, which is why putting chasing on a system, not your memory matters most for small businesses.
Statutory interest
In short: Interest you are legally entitled to charge on late business-to-business payments in the UK.
Under the Late Payment of Commercial Debts (Interest) Act 1998, UK businesses can charge statutory interest on overdue B2B invoices at the Bank of England base rate plus 8%. Because the base rate moves, work out the current figure with the late-payment interest calculator rather than assuming a fixed number. Often the deterrent works better than the charge: naming it on your invoice signals you take payment seriously. This is general information, not legal advice.
Fixed compensation (debt recovery costs)
In short: A fixed sum you can add to each overdue B2B invoice on top of interest, set by statute.
As well as interest, the same Act lets you claim a fixed sum per overdue B2B invoice to cover recovery costs: £40 for debts under £1,000, £70 for debts of £1,000 to £9,999.99, and £100 for debts of £10,000 or more. These amounts are fixed in law and are per invoice, not per chase. See the letter before action guide for how they fit into a formal demand.
Letter before action (LBA)
In short: A formal final notice warning that you will start court proceedings if payment is not made.
A letter before action is the formal step between chasing and court. It states the amount owed, any interest and compensation, and a clear deadline (commonly 7 to 14 days) to pay before you begin a claim. Sending one is a pre-action requirement in England and Wales and often prompts payment on its own. There is a full walkthrough and template in the letter before action guide.
Bad debt
In short: Money owed that you have concluded you will not collect, and write off.
A bad debt is an invoice you have accepted will not be paid, for example after a customer becomes insolvent or goes silent through every stage. Writing it off removes it from your books and, in the UK, may allow you to reclaim the VAT you already paid on it via bad debt relief once the debt is over six months overdue. The best defence is catching a drift early, before it hardens into a write-off: see what to do when a client won't pay.
Payment terms (net 7, net 30)
In short: The agreed window a customer has to pay. "Net 30" means the full amount is due 30 days after the invoice date.
Payment terms set when an invoice is due. "Net 7", "net 14" and "net 30" mean the balance is due 7, 14 or 30 days after the invoice date. Shorter terms paid on time beat long terms paid late, so name an actual due date rather than "on receipt", and agree it in writing before the work starts. More on this in how to reduce late payments.
Money Claim Online / small claims
In short: The online route to make a county court claim for a debt, for amounts up to £10,000.
Money Claim Online (MCOL) is the government service for starting a county court claim to recover a debt in England and Wales. The small claims track handles most straightforward debts up to £10,000. It comes after a letter before action, not instead of it, and a claim can often be issued for a modest fee. This is general information, not legal advice; check the current fees and thresholds on GOV.UK before you file.
For the whole picture, start with the full guide to getting paid.