Money

How to set a credit limit for each shop, with a simple formula

Weekly purchase × weeks of credit, adjusted for each shop's record. What happens at the limit, who may approve going over, and how to review limits every month.

4 October 2026 · 5 min read

Short answer

Credit limit = what the shop buys in a week × the weeks of credit you allow. Start new shops low, raise the limit when they pay on time, and lower it when they slip. At the limit, the next bill is cash or the oldest bill gets cleared first. Only the owner approves going over.

Without a limit, shop credit grows quietly. A good shop asks for a little more each week, the salesman does not want to lose the order, and three months later that shop owes you ₹60,000 and pays only when it feels like it. A credit limit is not about distrust. It is a number everyone agrees on before there is a problem.

A simple formula

Credit limit = average weekly purchase × weeks of credit
Example: a shop buys about ₹8,000 a week. You give two weeks of credit. Limit = ₹16,000.

“Weeks of credit” is your decision, based on what you can afford. If the company wants payment in 7 days and you give shops 30, you are lending the difference out of your own pocket. See the company wants cash, the shops want credit.

Adjust the number for each shop

Payment record: always on time? You can be generous. Often late? Keep it tight.
How long you have known them: new shops start low, or on cash.
Owner present: shops where the owner is at the counter usually pay more reliably than those run by staff.
Warning signs: buying from many distributors at once, sudden big orders, or excuses that change every week.

What happens at the limit

Bill would cross the limit
salesman cannot just go ahead
Clear the oldest bill
or pay cash for this one
Owner approves
only for a reason
Limit reviewed
monthly, up or down

The rule says no, so the salesman does not have to.

The worst place for a credit decision is the shop counter, with the owner watching and the salesman wanting the sale. Decide the rule in the office, in advance. Then the salesman can say, “The office has fixed it. Clear the bill of the 12th and I can bill today.” See how to collect payments from shops for the exact words.

Review limits every month

Shops that always paid on time: raise the limit a little. Reward good behaviour.
Shops with bills over 30 days: lower the limit, or put new credit on hold.
Shops that stopped buying: find out why, and collect what they owe.

For keeping the balances themselves, see how to track shop credit without a notebook.

How Mulberry Sales helps

Every shop can have its own credit limit. A bill that would cross it is refused on the salesman’s phone and on the server, so the limit holds even when the owner is not there. When there is a good reason, the owner can approve one bill over the limit with a code (Business plan). A shop can be put on hold for new bills while the salesman keeps collecting what it owes, and the Credit Record shows every shop’s balance by age, which is the list you review each month. See collection and credit control.

Questions people ask

How do I decide a credit limit for a shop?

Take what the shop buys from you in an average week and multiply by the number of weeks of credit you are willing to give. A shop that buys ₹8,000 a week with two weeks of credit gets a limit of about ₹16,000. Start new shops lower and raise the limit once they pay on time.

What happens when a shop reaches its credit limit?

The next bill should be cash, or the shop clears the oldest bill first. Only the owner, not the salesman, should approve a bill above the limit, and only for a reason.

Should a new shop get credit?

Usually only a small amount, or none for the first few orders. Give credit once the shop has bought and paid a few times, and grow the limit as it proves itself.

Found this problem in your business?

Don't estimate it. Run one van on Mulberry Sales for 14 days with your own shops, products and salesman, and measure it. One price covers your whole business, not each salesman.

How Mulberry handles it: Collection and credit control →

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