Credit control for trading companies: warn or block, and who approves?
Most bad debts start as a normal order for a customer who was already over their limit. Good credit control is a simple rule applied every time, not a heroic call by finance.
1. Set a limit per customer
Base it on payment history, order size and terms. Review it every quarter, and after any late payment. New customers start low and earn a higher limit.
2. Check every order, not just invoices
By invoice time the goods are often already made or shipped. Check the limit when the customer order is raised: outstanding balance plus open orders plus this order.
3. Decide: warn or block
| Mode | What happens | Use it when |
|---|---|---|
| Warn | The user sees the customer is over the limit but can continue | You are introducing limits and want the team to get used to them |
| Block | The order stops until someone with the right role approves | Limits are agreed and you want them enforced |
Start with warn for a month, then switch to block.
4. Name who can approve
One or two people in finance or management, not the salesperson on the deal. The approver should see the balance, the overdue amount and the order value in one place.
5. Log every override
Who approved, when, and why ("payment of USD 9,000 received today"). The log protects the approver and shows which customers keep needing exceptions.
BOEY applies these rules on every customer order: warn or block per company, approval by role, and an audit log of each override.