Running the business Credit control
Credit control policy for distributors
A credit control policy is a one-page set of rules for who gets credit, how much, for how long, and what happens when they pay late. Written down, it takes the emotion out of collection and lets staff act without asking the owner each time.
- Distributors
- Wholesalers
- Stockists and C&F agents
- Accounts teams
- Sales managers
On this page 10
Why distributors need one in writing
In most distribution businesses, credit is given on relationships and remembered by the owner. That works until the business has 300 dealers and five salespeople. Then each salesperson extends credit to hit targets, nobody stops supply to slow payers, and old outstanding builds up quietly.
A written policy makes everyone apply the same rules, makes exceptions visible, and gives you something to show a dealer who asks "why is my order on hold?"
Template: credit control policy
1. Opening a credit account
- New parties start on advance or cash for the first two or three orders.
- Collect GSTIN, PAN, shop address, owner's mobile number and two trade references.
- Check the GSTIN is active and the legal name matches.
2. Credit limit and terms
- Initial limit: about two weeks of the party's expected purchases.
- Standard credit period: 30 days from invoice date (state your own).
- Review limits every six months based on payment record. See setting credit limits for customers.
3. Invoicing
- Every invoice shows the due date and bank / UPI details.
- Receipts are adjusted against specific bills, oldest first unless the party says otherwise.
4. Follow-up schedule
| When | Action | By |
|---|---|---|
| 3 days before due | Friendly reminder on WhatsApp | Accounts |
| Due date | Statement with due bills | Accounts |
| 7 days overdue | Phone call | Salesperson |
| 15 days overdue | Visit and firm reminder; new orders need approval | Salesperson |
| 30 days overdue | Supply stopped; owner call | Owner |
| 60 days overdue | Formal letter; refer to CA or lawyer | Owner |
5. Stop-supply rule
- No new dispatch if the limit is crossed or any bill is 30 days overdue, unless the owner approves in writing (a WhatsApp message counts).
6. Disputes
- A disputed bill is logged within 2 working days and resolved within 7. Undisputed bills on the same account remain payable.
7. Cheque bounces
- After one bounce, the party moves to advance or RTGS/UPI-only until the amount is cleared.
Rolling it out without upsetting dealers
- Share a short note with all dealers: the credit period, the reminder they will receive, and the stop-supply rule. Present it as a system, not a complaint.
- Start with fresh bills. Agree a separate plan for old outstanding, such as weekly part-payments.
- Train salespeople. They must know they can say "the system has put a hold" rather than make it personal.
- Apply it to everyone, including large dealers. Exceptions should be approved and recorded, not quietly made.
Measuring whether it works
- DSO every month (debtors ÷ credit sales × days).
- Share of outstanding older than 30 and 60 days, from your ageing analysis.
- Number of exceptions approved by the owner.
- Bad debts written off in the year.
Who does what
| Role | Responsibility |
|---|---|
| Owner | Approves limits above a set amount, exceptions to the stop-supply rule and write-offs |
| Accounts | Keeps bill-wise records, sends statements and reminders, flags parties over limit |
| Salesperson | Collects KYC for new parties, follows up overdue bills in their territory, records collections the same day |
| Dispatch | Does not load orders marked on hold |
The dispatch line matters more than it looks. A policy that stops at the accounts desk but not at the loading bay will be ignored within a month.
Running the policy with Tally and Cashflow OS
The policy depends on bill-wise data, which TallyPrime already keeps. Cashflow OS shows that outstanding and ageing on the phone, by party, so a salesperson can check a dealer's dues before taking an order. Orders from frontline staff can be set to need approval, which is a natural place to apply the stop-supply rule. Party statements go out on WhatsApp in English or Hindi. More on the Cashflow OS setup for distributors.
Avoid these
Common mistakes
- MistakeLetting salespeople set credit to hit targetsDo this instead
Give limits and terms from the policy; exceptions need the owner's written approval.
- MistakeExempting large dealers from the rulesDo this instead
Agree a specific limit and period for them in writing, so every party has a known rule.
- MistakeMixing old dues with new bills when startingDo this instead
Agree a separate written repayment plan for old outstanding, and apply the policy to new bills from day one.
- MistakeAccounts puts a hold but dispatch still loadsDo this instead
Make dispatch check the hold list before loading, and record every approved exception.
Keep handy
Checklist
Credit control policy for distributors — 8 checks. Tick them as you go.
In Cashflow OS
How Cashflow OS helps
Cashflow OS puts your TallyPrime books on every phone in the team. Where it fits this topic:
Dues before taking an order
Bill-wise outstanding and ageing from Tally show on the phone by party, so a salesperson checks a dealer's dues before booking more.
See Outstanding receivables
Approval for frontline orders
Orders from frontline staff can be set to need approval before they go to Tally, a natural place to apply the stop-supply rule.
See Team roles and access
Questions people ask
Should every dealer have the same credit period?
What if a large dealer refuses to accept the policy?
How do I handle old outstanding when starting the policy?
How often should the credit policy be reviewed?
Should I ask new dealers for a security deposit?
What is DSO?
Can I charge interest on late payments?
When should a bad debt be written off?
This page is general information for Indian businesses, not tax, legal or financial advice. Rules and rates change — check the official portals or your CA before acting.
