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Credit limits only work if they’re enforced. We mentioned this in a recent edition of Cash Flow Chronicles. Did you see it?
Many businesses set limits but hesitate to act when a customer reaches them. The fear of slowing sales or damaging a relationship often leads to extending more credit anyway.
That’s where risk begins to grow.
What a credit limit is meant to signal
Exposure has reached a defined threshold
Collections should happen before additional work continues
Risk needs to be reviewed before extending more credit
Credit limits are not meant to stop good customers. They’re meant to keep balances manageable.
What disciplined businesses do
Pause shipments or work until balances are reduced
Request partial payment before continuing
Confirm when the next payment will arrive
Communicate clearly and professionally
Consistency matters
Customers learn quickly how seriously a company treats payment expectations. When limits are enforced consistently, payment behavior usually improves. You may not realize it, but they are watching and monitoring.
I’ve managed both sides of this, AP/AR. On one side, AP, I am always asking who is yelling the loudest? Meaning that if they aren’t pushing to be paid put on a normal cycle after terms. If they are yelling, pull in payments earlier. On the other side, AR, I am always telling teams to push push push to be paid asap and at terms. It’s a fine balance.
If you do one thing for me today, please take a second and SHARE my YouTube intro for my Skool group. I’m trying to reach more Veterans this year and would love to get this out to as many people as possible. Thank you all!
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