25 August 2026 · TechSlideITS
Credit sales and recovery in a trading business
Extending credit is how most trading businesses grow. Failing to track it by age is how they run out of cash while showing a profit.
A trading business that sells only for cash is limited to customers who can pay today. Credit is how the business grows, and it is not a problem in itself.
The problem is that credit given is easy to see and credit ageing is not — so businesses discover the issue as a cash shortage rather than as a receivables number.
Profitable and broke at the same time
This catches people out because it feels contradictory. Profit is recorded when the sale happens. Cash arrives when the customer pays.
A business growing its sales on credit records rising profit and declining cash simultaneously, and both are accurate. The gap is the receivables balance, and it grows quietly because nothing forces you to look at it.
The four things that are usually missing
Ageing rather than a total
Knowing that customers owe a certain amount is not useful. Knowing how much is over 30, 60 and 90 days is.
Recovery difficulty rises sharply with age. Money at 30 days is a reminder; at 180 days it is a negotiation. Without ageing, you cannot act early because you cannot see early.
Limits that actually stop something
Most businesses have an idea of what each customer should owe. Very few have it recorded, and fewer still have anything that flags when a sale would exceed it.
A limit that exists only in the owner's memory works until the owner is not at the counter.
A follow-up rhythm rather than a crisis response
Where follow-up happens when cash is tight, customers learn that. Where it happens on a schedule, they learn that instead — and a scheduled call at 35 days is a normal business conversation rather than a confrontation.
The rhythm matters more than the firmness.
Reconciliation before it is disputed
The worst recovery conversations start with the customer disagreeing about the amount. Sending a statement periodically, while balances are small and recent, means disagreements surface early and get resolved as bookkeeping rather than as conflict.
What to look at, and when
- Weekly — new items crossing 30 days, so they can be chased while recent
- Weekly — anything over the customer's limit
- Monthly — full ageing by customer, and total receivables against last month
- Monthly — statements to customers with meaningful balances
- Quarterly — anything over 90 days, with a decision on each: chase, settle, or write off
The quarterly one is uncomfortable and necessary. Old receivables that everyone knows are not coming still sit in the accounts making the business look healthier than it is.
The trade-off to be deliberate about
Tighter credit control loses some sales. That is real, and worth accepting honestly rather than pretending otherwise.
The question is which sales. A customer who pays at 45 days reliably is a good customer with a working capital cost you can price in. A customer who pays at 150 days after repeated chasing is a loan you did not agree to make, at no interest.
Being able to tell them apart requires the ageing data. Without it, you are either too loose with everyone or too tight with everyone, and both cost money.
If you want to see ageing and limits handled at the billing counter, see our retail and trading ERP or book a demo.
Frequently asked questions
Profit is recorded when the sale happens; cash arrives when the customer pays. A business growing sales on credit shows rising profit and falling cash simultaneously, and both figures are correct. The gap is the receivables balance, which grows quietly because nothing forces anyone to look at it.
Because recovery difficulty rises sharply with age — money at 30 days is a reminder, at 180 days it is a negotiation. A single total tells you the size of the problem but not which part is still recoverable easily, so you cannot act early because you cannot see early.
Recorded per customer and checked at the point of sale, not held in the owner's memory. A limit that only exists in someone's head works until that person is not at the counter, which is precisely when the largest exceptions tend to happen.
Scheduled rather than triggered by a cash shortage. A call at 35 days on a routine cycle is a normal business conversation; the same call made only when you are short reads as a crisis and teaches customers to wait for it. The rhythm matters more than the firmness.
Some, and that should be accepted honestly. The point is choosing which sales. A customer who reliably pays at 45 days carries a working capital cost you can price in; one paying at 150 days after repeated chasing is an interest-free loan you never agreed to. Ageing data is what lets you tell them apart.