Credit sales
How much credit should you give a customer?
The amount a customer asks for is only one part of the decision. Add it to what they already owe, then look at what your business would have to fund if payment arrived late.
Count every open order
A buyer owes ₦250,000 on one sale and ₦150,000 on another. A new ₦300,000 order would bring the amount exposed to that buyer to ₦700,000, not ₦300,000. Check pending deliveries as well as invoices already due.
Keep disputed amounts visible. A dispute may change what is eventually payable, but it does not return cash to your business today. Do not treat a reported but unconfirmed transfer as money received when calculating available capacity.
Ask what supports the payment date
Find out when the customer expects to sell the stock or receive the money they will use to pay. A specific explanation is more useful than “business is good”. Past completed orders can help you assess the explanation, but they do not guarantee the next payment.
Watch for changes: a much larger order, a different delivery address, or a new person accepting terms. These are reasons to ask follow-up questions, not proof that the customer is dishonest.
Choose an amount your business can carry
There is no universal percentage that makes a credit limit safe. Compare the proposed exposure with the cash you need for wages, rent, supplier invoices and replacement stock. Test a delayed-payment case as well as an on-time case.
If the full order puts essential spending at risk, offer a smaller first delivery or ask for a deposit. Explain the arrangement in terms of the order, rather than making a judgement about the customer’s character.
Review after payments, not promises
Set a review point, such as completion of the current order. Record who approved the limit, the evidence they considered and the date of the next review. A new promise to pay should not automatically raise a limit.
If you reduce a limit, distinguish future supply from commitments already accepted. Speak to the customer before changing a delivery arrangement that is already agreed.
Questions people ask
Frequently asked questions
Should a long-standing customer always get a larger limit?
No. Their history is useful evidence, but your available cash and their current orders may have changed.
Does a credit limit mean the customer can order that amount every time?
It is a ceiling, not a promise to approve each order. Each sale still needs agreed terms and any required checks.