Covering Business Credit

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Commercial Credit Management

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Here is a scenario: A customer that has a credit limit of $10,000 has been paying 30 to 60 slow on $1,000 to $2,000 a month in purchases. They now have a $15,000 order shipped and built. My immediate reaction was No Way. What do you think?

Answer: Our decision is the same as your decision - No Way. Unfortunately, we do not have enough information to make a fully informed credit decision. For example, if this were a 5A1 rated and publicly traded company, our final decision could be different. If we knew the reason the customer was paying 30 to 60 slow, and it was legitimate [such as they were not paying because we were sending invoices to the wrong bill to address] then our answer might be different. As a general statement, if a customer such as this one cannot pay $1,000 any faster than 30 slow, there is little reason to suppose they will pay more promptly if the balance due increases to $15,000, and therefore there is no reason to offer the large credit limit.

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