Industry guide · UK
Credit control for wholesale and distribution businesses
By AutoSettle · Updated
Quick answer
Credit control for wholesale and distribution means opening trade accounts with credit checks and limits, using retention of title terms, resolving short payments quickly, and putting accounts on stop when they go overdue. With high volumes and thin margins, automated reminders and a clear stop policy keep bad debt low without slowing down sales.
Wholesalers and distributors sell on credit to hundreds or thousands of trade customers. Margins are thin, volumes are high and a single bad debt can wipe out the profit on many good orders.
At the same time, sales teams want to keep goods moving and customers happy. Good credit control balances the two: fast decisions on new accounts, clear limits, and firm but fair enforcement. This guide explains how UK wholesale and distribution businesses can do that.
Credit risks in wholesale and distribution
Many small trade accounts
Large numbers of customers mean small overdue balances are easy to miss until they add up.
Credit limits that drift
Limits set when an account opened may never be reviewed, even as the customer's orders or financial position change.
Short payments and deductions
Customers deduct for damaged goods, missing items or pricing differences. Unresolved deductions leave small balances that are never collected.
Sales pressure to keep supplying
Putting a customer on stop feels like losing sales, so overdue accounts keep receiving goods.
Customer insolvency
When a trade customer fails, unsecured suppliers often recover little. Retention of title clauses can help if they are drafted and used properly.
A credit control process for wholesalers
- 1
Use a trade account application
Collect company details, trade references and acceptance of your terms, including retention of title.
- 2
Credit-check and set a limit
Check Companies House and a credit reference agency, then set a credit limit and payment terms for each account.
- 3
Review limits regularly
Review limits for your largest and fastest-growing accounts at least annually, or when payment behaviour changes.
- 4
Resolve queries and deductions fast
Log every short payment, investigate within days, and issue credit notes or rebill promptly.
- 5
Send statements and reminders automatically
Send monthly statements and automated reminders before and after due dates.
- 6
Operate a stop list
Place accounts on stop automatically when they exceed their limit or pass a set number of days overdue, and tell the sales team.
- 7
Escalate and protect your goods
Add statutory interest, send a letter before action, and act on retention of title if a customer becomes insolvent.
Account status and recommended action
| Account status | Trigger | Action |
|---|---|---|
| Good standing | Within terms and limit | Supply as normal |
| Watch | 1–14 days overdue or near limit | Automated reminder, sales team informed |
| Stop | Over limit or 15+ days overdue | Hold new orders until payment |
| Escalation | 30+ days overdue | Statutory interest, letter before action |
| Insolvency | Customer enters formal insolvency | Claim goods under retention of title, submit creditor claim |
Your rights as a trade supplier
Trade customers are businesses, so the Late Payment of Commercial Debts (Interest) Act 1998 lets you claim statutory interest at 8% above the Bank of England base rate and fixed compensation of £40, £70 or £100 per invoice unless your terms provide a substantial alternative.
A retention of title clause keeps ownership of goods with you until they are paid for. To rely on it, the clause must be part of the contract, the goods must be identifiable, and they generally must not have been sold on or mixed with other goods.
This is general information, not legal advice.
Work out what you can claim with our late payment interest calculator.
Worked example (illustrative)
A fictional catering supplies wholesaler has 600 trade accounts on 30-day terms. Hartley Brooks Ltd, a restaurant group, has a £12,000 limit and has drifted to £14,500 outstanding with £4,000 more than 20 days overdue.
The account moves automatically to stop, the sales rep is notified, and a firm reminder mentions statutory interest and £100 compensation on the overdue invoice. The customer pays the overdue balance the same week and supply resumes. Figures are illustrative.
Getting sales and credit control aligned
Credit control works best when sales teams see account status in real time and understand the rules. Share the stop list daily, agree who can override it, and reward sales for collected revenue rather than just orders placed.
Terms of sale every wholesaler needs
Your standard terms of sale should be accepted by every trade customer when the account is opened, and referred to on every invoice. Make sure they include:
- Payment terms and your right to change credit limits or terms.
- A retention of title clause, ideally with a right to enter premises to recover goods.
- A deadline for reporting shortages, damage or pricing errors.
- Your right to stop supply if the account is overdue or over its limit.
- Statutory interest and compensation for late payment.
- Personal guarantees from directors for higher-risk accounts.
Wholesale credit control KPIs
Review these figures monthly with sales and finance together:
- Days sales outstanding across all trade accounts.
- Accounts on stop and the value of orders held.
- Unresolved short payments and deductions by age.
- Bad debt as a percentage of sales.
- Credit limits not reviewed in the last 12 months.
How AutoSettle helps wholesalers and distributors
With hundreds of trade accounts, manual chasing always falls behind. AutoSettle reads every open invoice from Xero, QuickBooks or Sage, sends statements and reminders automatically, and flags accounts whose payment behaviour is changing so you can adjust limits early.
Customers can pay online by card or bank transfer, and payments are posted back to your accounting system so your stop list is always up to date.
Frequently asked questions
What is a credit limit for a trade account?
The maximum balance a customer can owe at any time. Setting and reviewing limits controls how much you are exposed to any single customer.
What does putting an account on stop mean?
Holding new orders until the customer brings the account back within terms or under its limit.
Does retention of title really work?
It can, if the clause is part of your contract and the goods are identifiable and unsold. It is most useful when a customer becomes insolvent.
How should I handle short payments?
Log them, investigate quickly, and either issue a credit note or chase the balance. Unresolved deductions are a common source of bad debt.
Can I charge interest to trade customers?
Yes, under the Late Payment Act, unless your terms of sale provide a substantial alternative remedy.
Can AutoSettle handle hundreds of trade accounts?
Yes. AutoSettle monitors every account in Xero, QuickBooks or Sage and chases overdue invoices automatically at scale.
How often should I review trade credit limits?
Review your largest and fastest-growing accounts at least once a year, and immediately if a customer starts paying late, asks for a higher limit or shows warning signs such as late filing at Companies House.
Should I ask for personal guarantees on trade accounts?
For new or higher-risk limited companies, a director's personal guarantee can reduce your risk. It must be properly signed and witnessed to be enforceable, so use a clear standard form.