Credit can facilitate some B2B sales, but it is neither mandatory nor appropriate for every client. Terms such as Net 30, Net 60, or Net 90 mean that the seller finances the operation for that period.
The problem arises when your company starts growing rapidly and you find yourself financing dozens of clients at the same time. Suddenly, your Accounts Receivable skyrockets, and you run out of working capital to pay payroll or your suppliers.
In this article, we will break down the best practices to extend credit to your clients without risking the financial viability of your operation.
1. The Dynamic Credit Limits Model
Most B2B SMEs make the mistake of offering the same terms to everyone. A new client receives the same treatment as one with three years of perfect history. This is financially irresponsible.
Implement an Internal “Credit Score”
Don’t rely solely on the commercial credit bureau. Create your own risk matrix evaluating:
- Purchase frequency: Does the client buy every week or once a year?
- Days Sales Outstanding (DSO): If a client has Net 30 terms but historically pays on day 45, their credit limit should be frozen.
- Volume vs. Profitability: Sometimes, the biggest client is the one leveraging you the most. Ensure that the operating margin justifies the financial cost of credit.
In Cord, you can record credit limits and days, review outstanding balance, and inspect payment history. Cord does not automatically block a new quote approval because an invoice is overdue; your team must apply the business policy.
2. Factoring and Early Payment Discounts
The cost of capital is never zero. If you give a client 30 days to pay, you are absorbing that cost. You have two levers to mitigate it:
The power of 2/10 Net 30
Offer a discount (e.g., 2%) if the client pays within the first 10 days; otherwise, they must pay the full amount in 30 days. For many corporations, saving 2% is a giant incentive and injects immediate liquidity into your business.
Modern Factoring
If you evaluate factoring, compare the advance, total cost, recourse terms, currency, duration, documentation, and what happens when the buyer disputes an invoice. Cord does not provide factoring or recommend a specific provider.
3. Relentless Collection Automation
The “I’ll let you know when the deposit is done” is the enemy of your cash flow.
- Preventive confirmation: verify receipt and requirements before the due date.
- Contextual follow-up: when due, request a concrete date and record the promise.
- Agreed escalation: apply pauses or limits only when supported by the contract and commercial policy.
Conclusion
B2B credit is a fantastic sales tool, but it must be treated as a financial instrument with calculated risks. Systematize your limits, encourage early payment, and automate your reminders. Your cash flow (and your peace of mind) will thank you.
Pair this policy with the receivables and follow-up guide and the process for collecting invoices faster.