How do I set payment terms and credit limits for new customers?
How to set payment terms and credit limits for new B2B customers
Short answer
Start new customers on shorter terms (net-15 or COD) until they establish a payment history with you. Move to net-30 after two or three on-time payments. Reserve net-60 for established clients with strong payment records or large corporations with stable credit. Run a D&B credit check or request trade references for B2B clients above $5,000. The cost of a credit check is a fraction of the cost of one uncollected invoice.
Payment terms are a form of credit — when you invoice with net-30 terms, you're extending a 30-day interest-free loan to the client. Like any credit decision, it should be based on the client's ability and history of paying, not just your desire to win the business. Extending generous terms to a new client you know nothing about is a common source of bad debt that could have been avoided.
A tiered approach works well for most service businesses: new clients start on net-15 or cash on delivery (COD), move to net-30 after demonstrating reliable payment, and earn net-45 or net-60 only after a sustained track record. Communicate this clearly in your service agreement: 'New accounts begin on net-15 terms. Extended terms are available after three months of on-time payment.' Most legitimate businesses accept this without issue — only clients who expect to pay late will push back.
Credit checks for B2B clients: Dun & Bradstreet, Experian Business, and Equifax Business all provide business credit reports for a fee. A basic D&B report costs $25–50 and tells you whether a company has a history of late payment, judgments, or collection accounts. For a $10,000 project, this is the cheapest insurance you can buy. You can also request three trade references from the client (other vendors they work with) and call them — most businesses are honest when asked directly about payment history.
Credit limits set a ceiling on how much exposure you'll carry with any single client. If a client has a $5,000 credit limit and owes you $4,800, you don't start the next project until they pay down the balance. This prevents the scenario where a client owes you six months of unpaid invoices because you kept working while they kept not paying. Enforce credit limits consistently — the one exception you make is always the one that turns into a large uncollected balance.
For smaller clients or service businesses that don't want to run formal credit checks, three practical proxies: (1) How quickly did the client pay their deposit? Clients who pay deposits promptly pay invoices promptly. (2) Are they a referral from an existing client you trust? Personal vouching is strong signal. (3) Is the business established — have they been operating for more than two years? New businesses have higher failure rates, which translates to higher collection risk. Syntharra works best after you've extended credit — it handles the follow-up when invoices go past the terms you've set.