Panuka Credit

Debt is a double-edged sword. When managed well, it fuels business growth by attracting more customers and increasing sales. However, when left unchecked, it can silently erode profitability, choke cash flow, and ultimately bring a business to its knees.

For some industries—like wholesale, manufacturing, and service-based businesses—offering credit is not just an option; it’s a necessity. Customers expect it, competitors offer it, and refusing to extend it can mean losing valuable business. But how do you offer credit without putting your business at unnecessary risk?

As experts in debt collection and credit risk management, we’ve seen firsthand what happens when businesses extend credit without a solid strategy. Here’s how to get your business credit-ready while minimizing risks.

But how do you offer credit without putting your business at unnecessary risk?

1. Establish a Clear Credit Policy

Before offering credit, define the rules. A credit policy should outline:

✔ Who qualifies for credit and under what conditions

✔ Credit limits for different customer categories

✔ Payment terms (e.g., 30, 60, or 90 days)

✔ Interest rates or penalties for late payments

This policy should not be a one-size-fits-all document. Tailor it to your industry, customer base, and risk tolerance. Most importantly, ensure your team understands and enforces it consistently.

Use Legally Binding Agreements.

2. Conduct Due Diligence on Customers

Not every customer deserves credit. Before extending any, assess their ability to pay. This can include:

✅ Credit checks through references or credit bureaus

✅ Reviewing their financial statements (for larger accounts)

✅ Evaluating payment history with other suppliers

A customer's eagerness to take credit does not always mean they have the ability—or intention—to pay it back. Trust, but verify.

3. Use Legally Binding Agreements

Verbal agreements or informal arrangements can be a costly mistake. Always document your credit terms in a legally binding contract or credit application form that includes:

Payment terms and due dates
Interest on late payments)
Dispute resolution mechanisms
Personal guarantees for high-risk clients

A well-drafted agreement ensures that, if disputes arise, you have legal grounds to enforce payments.

4. Monitor Accounts Receivable Like a Hawk

Many businesses only realize they have a cash flow problem when it’s too late. Instead of waiting for invoices to go overdue, track your accounts receivable weekly. Use these key indicators:

📉 Average collection period: How long it takes you to collect payments

🚩 Aging reports: Identifying overdue accounts before they become bad debts

🔍 High-risk accounts: Spotting customers who frequently delay paymentss

If payments start slipping, act quickly—early intervention makes collection easier.

5. Have a Proactive Collection Strategy

Once an invoice is overdue, don’t wait. The longer you delay, the harder it is to collect. Effective collection strategies include:

📞 Friendly payment reminders before the due date

📩 Formal demand letters for overdue accounts

🤝 Negotiating repayment plans for struggling customers

⚖ Escalating to professional debt collection if necessary

A structured collection process ensures that outstanding debts do not become unrecoverable losses.

6. Work with Experts to Strengthen Your Credit Management

Business owners often assume they can handle credit management themselves—until they realize the cost of mismanagement. Poor credit control can result in:

❌ Cash flow shortages, making it hard to pay suppliers or employees

❌ Increased bad debts, directly affecting profitability

❌ Time wasted chasing payments instead of growing the business

This is where expert advisory services come in. At Panuka Credit, we help businesses build strong credit management frameworks, recover debts efficiently, and reduce financial risks..