To manage customer credit safely, offer tabs only to customers you know, set a written limit and settle-by date, record every charge and payment immediately, review balances by age each week, and stop new charges when a limit or due date is passed.
Managing customer credit means letting trusted customers buy now and pay later without letting unpaid balances drain your cash. It rests on a few rules applied every time: decide who gets a tab, set a limit and a date by which it must be settled, record every charge and payment immediately, review balances by age each week, and stop new charges when a customer goes over. Many neighbourhood shops, bars and cafés run tabs; the ones that do it safely treat each tab as a small loan with clear terms.
Decide whether and to whom to offer credit
A tab builds loyalty and convenience: regulars come back, spend without carrying cash, and settle weekly or monthly. The cost is that you have handed over goods or services without being paid, so your stock and costs leave the business before the money arrives. If a customer never pays, the loss is not just your profit on the sale — it is the full cost of what they took.
Worked example: a customer leaves owing $90 and never pays. If your gross margin is 40%, the goods cost you $90 × 0.60 = $54. To earn back that $54 of gross profit from other customers, you need $54 ÷ 0.40 = $135 of new sales. Small unpaid tabs take a surprising amount of ordinary trade to replace, which is why limits matter.
Offer credit by choice, not by default. Reasonable criteria include:
- A regular customer you know by name, with a history of visits.
- A working phone number and, ideally, another contact detail.
- A clear reason for a tab: a weekly shop, an office that settles monthly, a bar tab settled at the end of the night.
- Agreement to your terms, given before the first charge.
Set limits and terms
Every tab needs two numbers: a credit limit (the most the customer can owe) and a settle-by date or interval (when the balance must be paid). Without them, balances creep up and the conversation about paying gets harder each week.
One simple way to set a limit is to base it on normal spending. If a customer usually spends about $60 a week and settles every two weeks, a limit of $60 × 2 = $120 covers normal use with no room for the balance to run away. A new customer might start lower and earn a higher limit after a few months of paying on time.
Record every charge and payment immediately
A tab is only as trustworthy as its record. Charges remembered later and payments noted on a scrap of paper are where disputes start. Record each charge at the till, as a sale, with the items listed; record each payment the moment it is received, with the method. Give the customer the new balance each time, on the receipt or by telling them.
| Date | Entry | Charge | Payment | Balance |
|---|---|---|---|---|
| Mon 3 | Groceries | $24.50 | $24.50 | |
| Wed 5 | Bread, milk, eggs | $11.20 | $35.70 | |
| Sat 8 | Weekly shop | $58.30 | $94.00 | |
| Sun 9 | Payment, cash | $50.00 | $44.00 | |
| Tue 11 | Household items | $19.80 | $63.80 | |
| Fri 14 | Payment, mobile | $63.80 | $0.00 |
A ledger like this answers any question a customer might ask: what they bought, when, what they paid and what is left. It also protects staff, because nobody has to rely on memory.
Review balances by age every week
The total owed matters, but how long it has been owed matters more. A balance that is a week old is normal; one that is three months old may never be paid. Group each customer’s balance by the age of the oldest unpaid charge — this is called aging — and act on the oldest first.
| Age of balance | Customers | Amount owed | Action |
|---|---|---|---|
| 0–30 days | 14 | $1,120 | Normal; remind at settle-by date |
| 31–60 days | 4 | $430 | Friendly reminder; pause new charges if past the limit |
| 61–90 days | 2 | $210 | Direct conversation; no new charges until paid |
| Over 90 days | 1 | $90 | Agree a repayment plan or decide to write it off |
| Total outstanding | 21 | $1,850 |
Two simple ratios show whether credit is under control. First, compare total outstanding with monthly takings: $1,850 owed against $24,000 of monthly sales is $1,850 ÷ $24,000 = 7.7%. Second, work out how many days of credit sales are outstanding: if $3,000 a month goes on tabs, that is about $100 a day, so $1,850 ÷ $100 = 18.5 days. If either number keeps rising month after month, customers are paying more slowly than they are buying.
Follow up before balances go bad
Most unpaid tabs are not fraud; they are customers who lost track or are short for a while. A calm, early reminder recovers far more than a firm one months later. A sequence that works for many small businesses:
- At the settle-by date, mention the balance in person or send a short message with the amount.
- A week later, remind again and pause new charges until the balance is brought under the limit.
- At 60 days, call or speak privately, and agree a date or a repayment plan.
- Record each contact — date, what was said, what was agreed.
- At 90 days or more with no plan, decide whether to keep pursuing or write the amount off, and close the tab.
Keep credit separate from cash
A sale on a tab is a sale, but it is not cash. Keep that distinction clear in your daily numbers: takings include tab sales, while the cash drawer should only expect cash sales. When a customer later settles in cash, record it as a tab payment so it is not counted as a new sale. Mixing the two makes your drawer appear over on the day a tab is paid and short on the day it is run up.
Staff controls
- Decide which staff can put sales on a tab and which can record payments.
- Require the customer to be named on every tab sale — no anonymous tabs.
- Show the current balance and limit before charging, so staff can decline politely.
- Review tab activity by staff member alongside voids and discounts.
Doing this in SageBizet
SageBizet customer tabs keep a record for each customer — name, phone and a note where you can write their terms — with a running balance built from charges and payments, and a total outstanding across all customers. At the point of sale, attach the customer and choose “On tab” to charge the sale to their balance; in payment reports the sale appears under Other with a note, so it is never counted as cash. A call log records reminders and what was agreed, and staff roles control who can manage customers.