A distributor's real asset is its customers, and its real risk is what they owe. Sales are only complete when the money arrives. Many trading businesses are profitable on paper and short of cash, because receivables grow quietly. This guide explains how to keep credit sales under control with customer ledgers, payment terms, ageing and a weekly routine.
The customer ledger
Every customer should have a ledger: a dated list showing the opening balance, each invoice, each payment, each return and the running balance. It answers "what does this customer owe and why?" in a minute.
Use it to:
- agree balances with customers,
- settle disputes,
- see who pays late,
- and print a statement.
Payment terms
Payment terms say when an invoice is due. Common ones are due on receipt, net 7, net 15, net 30 and net 60 days. Set a term for each customer, and let the due date on every invoice come from it. Then "overdue" has a clear meaning.
Example: an invoice dated 10 October on net 30 terms is due on 9 November.
Ageing: how late is late?
An ageing report groups what customers owe by how long it has been outstanding.
| Age of invoice | Amount (Rs) | Share |
|---|---|---|
| Current (not yet due) | 1,800,000 | 60% |
| 1 to 30 days overdue | 600,000 | 20% |
| 31 to 60 days overdue | 360,000 | 12% |
| 61 to 90 days overdue | 150,000 | 5% |
| Over 90 days | 90,000 | 3% |
| Total owed | 3,000,000 | 100% |
Check: 1,800,000 + 600,000 + 360,000 + 150,000 + 90,000 = 3,000,000.
The older the debt, the harder it is to collect. In this example, 8 percent of receivables is over 60 days late. Those are the customers to call first.
A weekly credit-control routine
Monday. Run ageing. List customers with anything overdue.
Tuesday. Send reminders or a statement to the 1 to 30 day group.
Wednesday. Call customers over 30 days. Agree a payment date and write it down.
Thursday. Decide whether to hold new orders for customers over 60 days.
Friday. Record what was promised and what was received.
Keep it the same every week.
Credit policy
Write a simple policy:
- who can get credit, and how much,
- standard terms,
- what happens at 30, 60 and 90 days late,
- who can approve an exception.
A policy does not need to be long. It needs to be applied equally.
Measuring collection
Two simple measures tell you if credit control is working:
- Percentage of receivables over 60 days. It should fall.
- Days to collect. Receivables divided by sales per day. If you sell Rs 100,000 a day and are owed Rs 3,000,000, you collect in about 30 days.
Common mistakes
- No due date. Nobody is late.
- Invoices only on paper. Disputes cannot be settled.
- No ageing review. Old debts are found at year end.
- Continuing to supply a customer who does not pay.
- Unrecorded promises.
- Cash sales used for credit customers.
How OneAccounts does it
OneAccounts has a customer ledger with an opening balance and a PDF, and a matching vendor ledger. Receivable ageing and payable ageing show Current, 1 to 30, 31 to 60, 61 to 90 and over 90 days, with a PDF. Customers can have payment terms of due on receipt, net 7, net 15, net 30 or net 60, and a new invoice takes its due date from the customer's terms. Invoices can be shared on WhatsApp. The dashboard lists overdue invoices and bills.
OneAccounts does not set a credit limit that blocks a sale, so apply your limit by policy. See Trading ERP software.
Frequently asked questions
What is a customer ledger?
A dated record of everything a customer has been billed and has paid, with a running balance.
What are payment terms?
The number of days a customer has to pay an invoice.
What is an ageing report?
A report grouping amounts owed by how overdue they are.
How do I reduce late payments?
Set clear terms, send statements on time, follow up weekly and review who gets credit.
Should I charge interest on late payments?
Only if your agreement says so. Many traders prefer to hold supply instead.