For many accounting firms, the biggest strain on cash flow isn’t overheads, wages, or technology costs, it’s unpaid client invoices. Firms provide quality services, but when clients delay payment, the business carries the financial burden. Staff still expect to be paid, office costs keep running and the firm’s own obligations don’t pause just because clients haven’t settled their accounts.
A debt policy is a simple, written set of rules that outlines how the firm manages invoicing, client payments, and overdue accounts. It doesn’t need to be complicated, but it does need to be clear and consistently applied. Having a policy helps firms take control of debts, protect cash flow and avoid difficult situations where unpaid accounts spiral out of control.
Why Having a Debt Policy Matters
1. Protects Cash Flow
Cash flow is the lifeblood of any accounting firm. Without timely payments, even profitable firms can run into serious financial stress. A debt policy makes sure invoices are sent promptly, reminders are issued on schedule and overdue accounts are escalated quickly. This means money flows in more reliably, supporting wages, overheads and growth.
2. Sets Expectations with Clients
Clear communication is key. A debt policy allows firms to explain upfront what their payment terms are, when invoices are due and what happens if clients miss deadlines. By spelling this out early, clients understand the process and are less likely to push boundaries. It also takes the emotion out of debt collection. Staff can refer back to “the firm’s policy” instead of making it feel personal.
3. Creates Consistency Across the Firm
Without a policy, chasing debts often depends on individual staff. Some may be quick to follow up, while others avoid the task altogether. This inconsistency can cause confusion for clients and delays for the firm. A debt policy ensures everyone follows the same steps, in the same timeframe, which creates fairness, professionalism and better results.
4. Reduces Bad Debt Risk
The longer an invoice goes unpaid, the harder it becomes to collect. A debt policy includes a clear escalation process: reminders at set intervals, phone calls, and eventually referral to collections or legal action if necessary. Acting quickly reduces the chance of debts becoming uncollectable and sends a strong message that the firm takes payment seriously.
5. Supports Staff Confidence
Chasing overdue accounts can be uncomfortable, especially for team members who prefer client service over difficult conversations. A debt policy removes uncertainty by giving staff a script to follow: when to send reminders, what to say, and when to escalate. This gives staff confidence and consistency and ensures no one is left second guessing.
6. Strengthens the Firm’s Financial Health
Unpaid debts don’t just hurt cash flow, they also create stress, waste time and distract from client service. By reducing overdue accounts, a debt policy improves profitability and stability. The firm can plan with confidence, reinvest in staff and technology and avoid the constant pressure of chasing money that should already be in the bank.
7. Builds Trust and Professionalism
Clients expect their accountants to demonstrate financial discipline. By having a clear debt policy in place, firms set a professional example. It shows that the firm values its services, expects fair treatment in return and runs its business with the same standards of accountability that it advises clients to follow.
What a Debt Policy Should Include
A strong debt policy typically covers:
- Payment terms– when invoices are due
- Invoicing process– how and when invoices are sent
- Reminder schedule– when to send first, second, and final reminders.
- Late fees or interest – whether additional charges apply to overdue accounts.
- Escalation process – when to escalate to senior staff, external collections, or legal action.
- Roles and responsibilities – who issues reminders, who makes calls, and who authorises escalation.
- Client communication – how payment terms and consequences are explained upfront.
By setting these rules, the firm removes uncertainty and ensures everyone understands the process.
For accounting firms, unpaid invoices are more than an inconvenience, they threaten financial health and place unnecessary stress on staff. A debt policy provides the structure needed to manage debts proactively, not reactively. It ensures cash flow stays strong, staff have confidence in the process and clients understand their responsibilities.
Most importantly, a debt policy shows that the firm values its work and expects to be paid fairly and on time. In a profession built on trust, discipline and financial responsibility, it’s one of the smartest steps a firm can take.