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.
