How to manage customer credit (tabs) without losing money

Why credit without control is expensive

Letting regulars run a tab helps you sell and keeps them coming back, but every sale on credit is stock you already paid for and money that hasn’t come in yet. Until they pay, you can’t use it to restock. And what isn’t written down gets forgotten: the customer doesn’t remember how much they owe, neither do you, and the argument ends up costing you both the money and the customer.

The rules for selling on credit

1. Only extend credit to customers you know, who buy often and live or work nearby.
2. Give each one a limit, based on how much they buy and how they’ve paid. Start low and raise it for those who pay on time.
3. Agree on a due date (payday, end of the month) and write it down.
4. Record each sale on credit right away: date, what they took and how much.
5. Record each payment and the balance left, and show it to the customer.
6. No more credit for anyone over their limit or with an overdue balance.

How to keep the record: one page per customer

A credit notebook works best with a page for each customer, like the template above: each line is a sale on credit or a payment, with the balance left after it. This is Linda Brown’s month, with a $100 limit:

Linda Brown owes $21 and has $79 of credit left. Payments reduce the total balance, not a specific purchase: what they pay covers the oldest first.

How to collect without losing the customer

• Remind them before the due date, not after: a message the day before feels like a favor, not a complaint.
• Collect in private and kindly, never in front of other customers.
• Send the balance in writing, for example by WhatsApp or text with what they took and what they’ve paid: it avoids arguments.
• Accept partial payments and record every one: a customer who pays a bit at a time is still a good customer.

Review your credit every week

Add up how much you’re owed in total and see who’s overdue. If that number keeps growing, you’re extending more credit than you collect: lower the limits or collect sooner. And a very old debt you won’t collect is a loss: take it off your books so you don’t count on money that isn’t coming.

Cash payments from customers go into the drawer: add them in your cash register closing. And before selling on credit, make sure the price leaves you a profit with the price and margin calculator.