In chemical trading, profit is made on sale, but survival depends on payment collection.
Many suppliers grow fast and then collapse because credit is not controlled.
Here’s a practical Credit Risk Management System used by strong distributors across India.
🎯 Objective
Sell more without getting stuck in bad debts.
🧱 1) Customer Risk Classification
Before giving credit, divide buyers into categories.
🟢 Low Risk
Old company, good reputation, timely payment history.
🟡 Medium Risk
New or irregular but genuine.
🔴 High Risk
New party, unstable market feedback, delayed history.
Credit terms must change as per risk — not emotions.
📄 2) Mandatory Documentation
Never supply on credit without:
✔ GST details
✔ firm registration
✔ address proof
✔ contact persons
✔ purchase history
✔ references
Big organizations like Reliance Industries approve vendors only after proper verification.
Small traders should be even more careful.
💰 3) Fix Credit Limits
Each party should have a maximum outstanding cap.
Example:
small buyer → ₹2 lakh
medium → ₹10 lakh
large → customized
No dispatch once limit crosses.
System must be strict.
⏳ 4) Define Credit Days Clearly
Examples:
7 days
15 days
30 days
Mention on invoice & order confirmation.
📊 5) Aging Monitoring (VERY IMPORTANT)
Check every week:
0–30 days
31–60 days
61–90 days
90+ days → danger zone
If you ignore aging, loss is guaranteed.
📞 6) Collection System
Professional suppliers do:
✔ reminder before due date
✔ call on due date
✔ follow-up every few days
✔ stop supply if overdue
Soft but consistent pressure.
🤝 7) Relationship vs Safety Balance
Support customers, but don’t finance their business.
Remember:
You are supplier, not bank.
🧠 8) Market Intelligence
Always ask in market:
“Payment kaisa hai?”
Transporters, other suppliers, brokers know reality.
🧾 9) Written Commitment
For large dues → take confirmation by mail/message.
Creates seriousness.
🚫 10) Early Warning Signs
Reduce or stop credit if you see:
❌ excuses increasing
❌ avoiding calls
❌ frequent management change
❌ market rumors
❌ payment breaking
Act early → save money.
⚡ Golden Rule of Chemical Trade
Bad sale is worse than no sale.
Turnover can be rebuilt.
Lost money is difficult to recover.
Many suppliers grow fast and then collapse because credit is not controlled.
Here’s a practical Credit Risk Management System used by strong distributors across India.
🎯 Objective
Sell more without getting stuck in bad debts.
🧱 1) Customer Risk Classification
Before giving credit, divide buyers into categories.
🟢 Low Risk
Old company, good reputation, timely payment history.
🟡 Medium Risk
New or irregular but genuine.
🔴 High Risk
New party, unstable market feedback, delayed history.
Credit terms must change as per risk — not emotions.
📄 2) Mandatory Documentation
Never supply on credit without:
✔ GST details
✔ firm registration
✔ address proof
✔ contact persons
✔ purchase history
✔ references
Big organizations like Reliance Industries approve vendors only after proper verification.
Small traders should be even more careful.
💰 3) Fix Credit Limits
Each party should have a maximum outstanding cap.
Example:
small buyer → ₹2 lakh
medium → ₹10 lakh
large → customized
No dispatch once limit crosses.
System must be strict.
⏳ 4) Define Credit Days Clearly
Examples:
7 days
15 days
30 days
Mention on invoice & order confirmation.
📊 5) Aging Monitoring (VERY IMPORTANT)
Check every week:
0–30 days
31–60 days
61–90 days
90+ days → danger zone
If you ignore aging, loss is guaranteed.
📞 6) Collection System
Professional suppliers do:
✔ reminder before due date
✔ call on due date
✔ follow-up every few days
✔ stop supply if overdue
Soft but consistent pressure.
🤝 7) Relationship vs Safety Balance
Support customers, but don’t finance their business.
Remember:
You are supplier, not bank.
🧠 8) Market Intelligence
Always ask in market:
“Payment kaisa hai?”
Transporters, other suppliers, brokers know reality.
🧾 9) Written Commitment
For large dues → take confirmation by mail/message.
Creates seriousness.
🚫 10) Early Warning Signs
Reduce or stop credit if you see:
❌ excuses increasing
❌ avoiding calls
❌ frequent management change
❌ market rumors
❌ payment breaking
Act early → save money.
⚡ Golden Rule of Chemical Trade
Bad sale is worse than no sale.
Turnover can be rebuilt.
Lost money is difficult to recover.
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