1. Decide the rules when nobody is asking
The worst time to decide whether a customer gets credit is while he is standing at your counter with a truck outside. Work out in advance who qualifies — how long they have been buying, what they buy, whether you know where they work — and what the starting limit is. Write it down. A rule you set calmly is a rule you can apply without it becoming personal.
2. Start every party low and raise it
A limit is easy to increase and very hard to reduce. Start every new credit customer at a figure you would be comfortable losing, and raise it once they have settled a few cycles on time. Customers understand a graduated arrangement; they do not understand a limit being cut after a year of buying. The direction of travel matters more to a relationship than the number.
3. Terms mean a date, not an intention
Fifteen, thirty, forty-five or sixty days — decide which applies to each party and say it plainly at the start. Vague terms produce vague payment, and a customer who was never told a date cannot be said to be late. Where a party settles against their own site payment, agree what happens if that is delayed, so the conversation has already been had once.
4. The limit has to do something
A limit written in a diary is a wish. It works when the system warns at billing time that a new bill would take a party over it — before the material leaves, while you still have leverage. It also gives counter staff a straight answer to give a regular customer without making the decision themselves, which keeps the awkward part with you rather than at the counter.
5. Review the terms, on a schedule
Go through your credit list twice a year rather than reacting to problems. Parties who consistently settle early deserve better terms and will notice. Parties whose ageing is drifting need tighter ones before it becomes a recovery problem. Doing it on a schedule makes it business rather than an accusation, which is what allows a term to be tightened without damaging a relationship.
6. Know your total exposure
The figure that matters is not what any one party owes but what is on the street in total and how old it is. That number should be one you can state at any moment. If it is growing faster than your sales, your policy is not holding — and the earlier you see that, the more of it is still recoverable.