Every business owner loves to see sales growing. More customers, more receipts, more stock moving. It all looks great on paper. But there’s a catch: not all sales bring in cash right away. When part of your sales come from customers buying on credit, your business might look busy, yet your bank account tells a very different story.

Selling on credit can seem like a great strategy – it helps you build customer loyalty, attract more buyers, and keep your shop moving. But if it’s not managed carefully, it can slowly choke your cash flow and cripple your growth. The truth is, credit creates a dangerous gap between your sales figures and your actual cash in hand. And that gap widens with every unpaid sale.

Let’s break down the real dangers of selling on credit and how to handle it wisely.

1️.  Cash Flow Squeeze

This is the biggest danger of all. When customers delay payments, your daily business operations start to feel the pinch. You still have to pay rent, buy stock, pay suppliers, and keep your staff on payroll, but the cash you need is still out there, with your credit customers. Before long, you might find yourself dipping into personal savings just to keep things afloat.

Tip: Protect your business by setting clear payment terms – 7, 14, or 30 days and make sure every credit customer understands them.

2️.  Bad Debts

Not everyone who takes goods on credit will pay back. Some will delay endlessly, and others will not pay at all. Sometimes, it only takes one big unpaid debt to erase an entire month’s profit.

Tip: Only offer credit to trusted, repeat customers. For new clients, require partial upfront payment or start with smaller credit limits.

3️.  Administrative Freeze

Chasing payments can quickly become a full-time job – calling, texting, reminding, even pleading. It drains your time and energy, and instead of running your business, you spend your days managing debt. It’s stressful, unproductive, and damaging to your morale.

Tip: Keep clear records of who owes you and when payments are due. A good POS system like BizKit can automate credit tracking and even set customer limits.

4️.  Price Erosion: The Silent Profit Killer

This is one of the most overlooked dangers. Prices rarely stay the same. You might buy stock today at one price, sell it on credit, and by the time the customer pays, the supplier’s price has gone up. That means when you restock, your earlier profit disappears.

Example: You buy jeans at Ksh 800 and sell at Ksh 1,000 on credit. The customer pays next month, but your supplier’s price is now KSh 1,000. Your profit? Gone. You basically gave that item away for free.

How to Manage Credit the Smart Way

Selling on credit isn’t always bad – but it requires structure. Here are four practical ways to stay in control:

1. Set Clear Terms – Agree on how long customers can take before paying (e.g. 14 or 30 days). Put it in writing and stick to it.

2. Ask for a Deposit – For large or bulk orders, require at least 50% upfront. This cushions your cash flow.

3. Record Every Transaction – Never rely on memory. Keep digital records of all credit sales.

4. Try Layaway Plans – Let customers pay slowly while you hold the product. This keeps your stock safe and your cash moving.

Final Thoughts

Credit can help grow your customer base – but if unmanaged, it can drain your business from the inside out. The key is tracking, discipline, and smart systems.

With BizKit POS, you can manage credit customers like a pro. From setting credit limits to tracking balances, BizKit helps you keep your cash flow healthy while your business grows strong.