How to set credit limits for wholesale customers
A credit limit is the most you are willing to be owed by one buyer. Set it with a method, not a guess, and review it as the buyer earns trust.
Start from order value and terms
A practical rule of thumb: the limit should cover the orders a buyer places between being invoiced and paying. On Net 30 with monthly ordering, that is roughly one to two months of typical orders. On Net 60 it is more, which is why longer terms carry more risk.
Example: a cafe group orders about $3,000 a month on Net 30. A limit of $4,500 to $6,000 lets them order normally while one invoice is outstanding, and stops them running up three unpaid months.
Net 30 vs Net 60 at a glance
| Net 30 | Net 60 | |
|---|---|---|
| Typical limit | 1 to 2 months of orders | 2 to 3 months of orders |
| Cash tied up | Lower | Higher |
| Risk if the buyer fails | Lower | Higher |
| Best for | Most small trade buyers | Large, established accounts |
Evidence to look at
- Trade references from other suppliers, and how promptly those suppliers say they are paid.
- A business credit report for larger accounts.
- How long the business has traded and whether its filed accounts look healthy.
- Your own history: how the buyer has paid you so far. The aging report shows this at a glance.
Good habits
- Start new buyers low and raise the limit after three or four on-time payments.
- Review limits every quarter, and immediately when a buyer starts paying later.
- Use a hard block for accounts that have been late before, and a soft warning for trusted ones.
- Write the limit into your trade terms so the buyer knows it exists.
Questions
Should every wholesale customer have a credit limit?
Yes. Even a generous limit protects you from a buyer whose business suddenly gets into trouble.
How do I enforce a credit limit on Shopify?
Shopify does not enforce credit limits natively. Terms Due credit limits check the balance at checkout.
Related
Credit limits
Set a credit limit for each Shopify B2B company. Terms Due checks open balance plus the new order before checkout, so no buyer runs up more than you agreed.
Read moreOffering Net 30 on Shopify
A step-by-step guide to offering Net 30 payment terms to wholesale buyers on Shopify, from company setup and trade terms to reminders and collection.
Read moreCredit holds
Put Shopify B2B companies on credit hold automatically when an invoice is overdue or they pass their limit. New orders are blocked at checkout until they pay.
Read moreStop chasing wholesale invoices by hand
Install Terms Due, set a credit limit for each buyer and let the app hold, remind and collect.
Install on Shopify