Why reps sell past the limit
Reps are usually measured on sales, and a customer who wants another delivery is a sale today. The cost of the unpaid balance arrives months later and lands on someone else. Add a long relationship, an owner who promises to pay next week, and a rep who cannot see the balance anyway, and the limit becomes a suggestion.
None of that is solved by asking reps to be careful. It is solved by a limit the system checks on every order, the same way for everyone.
Set limits that mean something
Start from what the customer buys and how long they take to pay. A customer on 30-day terms who buys about the same each month will normally owe around one month’s purchases. Add a margin for a busy month, and you have a limit you can defend.
New customers start low and earn more by paying on time. Review every limit at least twice a year, and whenever a customer’s buying or paying changes.
TipNever set a limit you would not defend to the customer’s face; a number nobody believes gets overridden.
Check the right balance
The figure to compare is what the customer owes now plus what they are about to take: everything invoiced, less everything paid, plus the new order. Checking only overdue invoices, or only last month’s, lets a customer pile up current debt until it all falls due at once.
Payments should count the moment they are recorded. A rep who collects on the visit should be able to sell on the same visit, because the collection has freed the credit.
Decide: hold or refuse, and who releases
An order over the limit can be held for someone to decide, or refused outright. Holding suits most distributors: the order is not lost, and someone with authority looks at it. Refusing suits businesses that want no exceptions at all.
Whoever releases, it is not the rep and not the rep’s sales target. Give release rights to a few people in finance or management, and agree what they look at.
- Is any invoice overdue, and by how long?
- Has the customer paid on time over recent months?
- Is the excess small against the limit?
- Is a payment promised, and by when?
- Should the limit itself be raised?
TipIf the same customer is released every month, raise the limit or stop the releases; a limit that is always overridden is no limit.
Make the rule hold in the van
The office is not where most credit is given away; the van is. The check has to run on the rep’s orders and invoices too, at the moment they are saved, and it has to hold when the rep is working without signal. A rule that only the office follows teaches reps to sell first and explain later.
Give the rep a way out that keeps the sale: collect on the old invoices first, or sell the order for cash. Both keep the customer stocked without adding to the debt.
- Show the rep the customer’s balance before the visit
- Collect on open invoices first
- Raise the order; if it is over the limit, it waits
- Offer a cash sale for the excess
- Leave held orders for the office to decide
Watch age as well as amount
A customer can be under the limit and still be a problem, if part of the balance is months past due. Read the aging alongside the limit: an account with invoices more than 60 days past due deserves a conversation before the next order, whatever the limit says.
Credit control is a conversation with the customer as much as a rule in the system. Tell customers their limit and their terms, so a held order is never a surprise.
TipTell the rep why an order was held the same day; a rep who hears it first from the customer looks foolish and stops trusting the rule.
Checklist: Credit control for field sales
- Give every credit customer a limit and terms
- Base each limit on purchases and payment term
- Check invoiced less paid, plus the new order
- Count payments as soon as they are recorded
- Hold orders over the limit; do not just warn
- Give release rights to a few named people
- Make the same check run in the rep app
- Read the aging alongside the limit
- Review limits twice a year