Credit Sales: Giving Customers Time to Pay Without Losing the Money

Almost every Nigerian business that sells to other businesses ends up selling on credit. Rarely as a decision — usually because a good customer asked, it seemed rude to refuse, and it happened again.

Credit is a legitimate tool. Offered without structure, it becomes an interest-free loan from you to your customer, funded by cash you needed for stock.

What credit actually costs you

Money owed to you is money you cannot use. If ₦2m is sitting in unpaid invoices, that is ₦2m not buying stock, not paying salaries, not covering rent — while your own suppliers still expect to be paid on time.

That is the visible cost. The hidden one is that unmanaged credit ages into bad debt, and bad debt is not a delay, it is a loss of the entire margin plus the cost of the goods.

Decide three things in advance

Who gets credit

Not everyone who asks. A simple rule beats case-by-case sentiment: trading history with you, a registered business, and a named person responsible for payment. Write it down so staff can apply it without calling you.

How much

A limit per customer, set deliberately and known to whoever releases goods. Without a limit, exposure grows one reasonable request at a time.

For how long

Terms in days, agreed at the point of sale and printed on the invoice. "Net 30" written on the document is a fact. A vague understanding is a dispute waiting to happen.

The one report that matters: the ageing list

Every customer who owes you, and how overdue each amount is — current, 1–30 days, 31–60, 61–90, over 90.

Read it weekly. It takes two minutes and it tells you exactly who to call today. Two things become obvious quickly: which customers always pay late regardless of terms, and how much of your money is in the over-90 column, where recovery odds fall sharply.

Collecting without souring the relationship

Most late payment is not refusal. It is drift — the invoice is not in front of them, and nobody has asked.

• Before due date: a short reminder that it falls due on Friday. This alone fixes a surprising share of lateness.
• On the day: a friendly note with the invoice attached again.
• Seven days over: a call, not a message. Ask for a specific date, then confirm it in writing.
• Thirty days over: stop further credit until it clears. This is the hardest step and the one that decides whether your terms mean anything.

Be firm about the process and warm about the person. The customer is rarely the problem; the absence of a process is.

Two habits that prevent most disputes

Get delivery acknowledged. A signature or a confirmation against the delivery. Most "we never received it" disputes are really "we cannot find it", and they end instantly when you can show who signed.

Apply payments to specific invoices. When a customer pays a round figure covering part of several invoices and it is recorded as a lump sum, nobody can say what is still outstanding. Six months later that becomes an argument you cannot win.

Frequently asked questions

Should I charge interest on late payment? You can, if it is agreed in writing up front. In practice, tightening the process collects more than penalties do.

A big customer wants 90-day terms. Price it. Ninety days of your cash has a cost — either it is in the price or you are absorbing it.

When do I write it off? When collection is genuinely unlikely, not when it becomes uncomfortable. Writing off promptly keeps your figures honest; leaving it inflates what you think you are owed.