What is a credit hold and when should you place one on a customer?

A credit hold is one of the most effective — and least used — tools in the AR toolkit. It works because it removes the incentive for a slow-paying customer to continue delaying: if you stop delivery, the customer's own operations are disrupted. A customer who was content to let an invoice sit at 60 days unpaid becomes highly motivated when their next order is blocked.

Most businesses place credit holds inconsistently, or not at all, because the sales team pushes back. The standard argument is 'we'll lose the customer.' In practice, customers who routinely pay late are not profitable customers — the carrying cost of their AR balance, plus the collection effort, often exceeds the margin on their account. A credit hold forces a conversation that almost always ends in payment or a payment plan.

Best practice: automate the trigger. Set a threshold — for example, any customer more than 45 days past due on an invoice over $500 — and apply holds automatically. This removes the human judgment call that sales teams contest, and it ensures consistent enforcement across all customers.