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External customers present several credit risks to institutions. When agreeing to extend credit, institutions must consider the credit risks associated with the type of customer they are intending to trade with and take steps to minimise the risks of late payment or non-recovery.

Type of customer Risk level and rationale Procedure to mitigate risk
Students Students are in general judged to pose a considerable credit risk due to their financial situation, frequent change of address and the short duration of time in which they are at the institution.

Where appropriate consider requesting financial evidence that the Student can afford the program.

Payment should be collected before the student leaves the University, particularly when they are based outside of the UK. Awareness of the duration of the academic year when billing and chasing debts relating to students is advised.

Obtain both home and term-time contact details (including e-mail addresses) to ensure alternative means of contact can be used to pursue payment should students leave the University.

The Finance Offices of Colleges are often willing to co-operate with the recovery of students’ debts.

Institutions may consider excluding students from their programmes or seeking their exclusion from graduation if course fees are not settled in full. 


These debts should be considered higher risk and prioritised accordingly. 

Prompt collection is required if the employee is about to leave the employment of the University. 

Obtain both home and work contact details for customers who are employees of the University, to ensure alternative means of contact can be used to pursue payment should employees leave the University before settling outstanding debts.

Invoices raised to this customer-type should not be allowed to become overdue for payment or require a bad-debt provision against them.

Institutions should aim to achieve appropriate resolution without resorting to legal action.


These debts should be considered higher risk due to lack of available information to assess financial health.

Due to the inability to conduct credit checks on individuals, the risks associated with issuing customer accounts to such parties must be carefully assessed.

Obtain formal written verification of address.
Sponsors and donors

There is often a fine line between a sponsorship and a donation. Refer to Common Errors (Chapter 9: VAT and Other Taxes).

Chasing for payment can be sensitive. Relationships have been carefully built with the sponsor or donor to obtain such commitments and the institution may hope for future commitments.

Such commitments are often made at one level of an organisation and processed for payment at another. It is feasible non-payment is due to a lack of communication on the customer’s side.

Ensure that pre-sales procedures have been followed for invoices raised.

If the recommended customer Purchase Order or written agreement has not been received from the sponsor or donor, the institution must speak directly to the individual who promised the funds.

Tactful reminders should be considered in the initial stages of recovery. For example, a letter thanking the sponsor or donor for their commitment, and outlining what their contribution is funding, may pre-empt a need for further recovery efforts.

Informal Organisations (Unincorporated associations) Informal, transient organisations, for example, sports clubs, music and drama groups, societies, can prove a significant credit risk as they can be difficult to chase for payment should membership change, or the organisation disbands.

Contact names and details must always be obtained and updated regularly.

Institutions may wish to ask for deposits as security

Affiliated organisations (Unincorporated association)
Cambridge Enterprise, CUPA:
These are part of the legal entity of the University.
Typically, this type of customer is low risk. If an invoice does exceed the agreed terms, institutions must call to establish whether there is a dispute about the invoice and actively seek to resolve the issue.
Cambridge University Colleges The risk level is the same as for affiliated organisations. Treat as an affiliated organisation.
Non-limited UK Businesses

This type of company can be set up with relatively few legal formalities and can present an increased credit risk as they can disband and re-form relatively easily.

Non-limited businesses can be either sole traders or partnerships and the owner(s) will be personally liable for all debts if the business fails.

Credit checks on non-limited businesses can be conducted but the information is very basic as there is no legal requirement for non-limited businesses to make any of their financial information public 

As a result, institutions must obtain the owner’s contact details in addition to those of the business in advance of committing to any sale.

Limited UK Companies

Limited companies should pose less of a credit risk as more accurate checks can be undertaken.

Limited companies can be privately owned, referred to as Limited (Ltd) or publicly owned (Plc).

The liability for both is limited. This means if the company fails, the liability of the company's shareholders is limited to the value of the shares and not their personal funds.

A company limited by guarantee has no shares or shareholders – it is owned by guarantors who will only be liable for the company debts up to the amount of their guarantees.

All Ltd companies have a registered company number and are legally required to submit company accounts (the form of which will depend on their size) every year. These documents are filed at Companies House and can be viewed using the Companies House website.

Request a credit check and only issue credit up to the recommended limit.

Confirm the correct legal entity name is set up for the customer in CUFS as this is vital to successfully recover any debts via the courts.

Confirm the address is correct, especially where a company has multiple locations.

Ensure there is a named contact, PO or reference before committing to any sale, which is then included on the invoice. This facilitates the subsequent invoice reaching the correct area.

Overseas organisations

There are specific risks associated with extending credit to customers based outside the UK as legal jurisdiction can be weak.

Chasing debtors based abroad is made difficult due to potential language barriers and differing time zones. Addresses can often be unclear and incomplete.

Issues of tax, regulatory and foreign exchange can be encountered. Debt recovery outside the UK is difficult, expensive, and unlikely to be successful.

Seek advance payment, or at least sufficient payment to cover any expenditure incurred by the University on the customer’s behalf. Ensure the organisation can make an international payment.

Obtain e-mail address of a financial contact. It is imperative that there is a named contact to ensure that direct communication is available.

Charities and Not-for-profit organisations

Each charity must be assessed on its own merits regarding its risk level.

Charitable incorporated organisation (CIO): Regulated by the Charity Commission. Trustees have limited-liability protection, meaning they will not be held personally liable if the charity falls into financial difficulty.

Charitable company (limited by guarantee):  Registered with both Companies House and the Charity Commission. It can own property and transact business with third parties on its own behalf. 

Trusts: A charitable trust is where a group of assets are assigned to a trustee (or board of trustees) who can control and use those assets (as well as any income they derive) to fund their charitable activities.

Not-for-profit organisations: Where activities are not for the financial benefit of any individual or board of directors. It is not a legal structure and does not operate under same restrictions as a Charity or CIO.

Ensure the name and address provided is correct. Obtain their registration number where appropriate.

Request a credit check to guide the decision as to their credit worthiness. Having a charitable status does not mean they are more likely to pay.

Latest version 16 April 2024

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