How to set customer credit limits in the UAE and actually enforce them

A short credit application saves trouble later. Ask for the trade licence (with its expiry date), the TRN certificate, the names and Emirates IDs of authorised signatories, bank details, two trade references, and expected monthly purchases. For larger limits, ask for recent financial statements.

Call the trade references. Ask how long they have supplied the customer, the credit limit they give, and how quickly they are paid. A reference who hesitates is telling you something.

• Valid trade licence and TRN certificate
• Authorised signatories and their IDs
• Two trade references, actually called
• Expected monthly volume
• Financial statements for larger limits

A practical starting formula is expected monthly purchases multiplied by (credit days ÷ 30) plus a small buffer. A customer expected to buy AED 80,000 monthly on 60-day terms needs a limit of about AED 160,000, plus perhaps 20%, so AED 190,000.

Then cap it by risk. Our view: no single customer should owe you more than one month of your total payroll unless they are a public body or you hold security. For a business with AED 250,000 of monthly payroll, a new private customer starting at AED 190,000 is already near the edge.

New customers start on advance payment or a low limit, say AED 25,000, for the first three months. If they pay on time, increase the limit in steps. If they pay late, hold the limit or reduce it. This builds a track record on your own books rather than relying on references alone.

Review every limit at least every six months, and immediately if a customer’s payment days lengthen, a cheque bounces, or you hear market news about them.

Watch for warning signs between reviews: a customer who starts paying by several small transfers instead of one, asks for statements to be resent, changes signatories, or suddenly orders far more than usual. None proves trouble, but each is a reason to look at the account before the next shipment. Write the policy down in one page, so the sales team knows the rules before a customer asks for an exception.

A Dubai electrical wholesaler gives a contractor a AED 150,000 limit on 45-day terms. The contractor currently owes AED 138,000, of which AED 40,000 is 20 days overdue. A new order arrives for AED 26,000.

Accepting it would take exposure to AED 164,000, over the limit, while part of the balance is overdue. The rule says hold the order until the overdue AED 40,000 is paid. The sales manager can escalate to the owner, who may approve a one-off exception, but that is a documented decision rather than a quiet shipment.

Record each customer’s credit limit and payment terms on their record. When someone drafts an invoice or sales order that would take the balance over the limit, the AI agent flags it and, if you set an approval rule, routes it for approval before it goes out. Ask “which customers are within 10% of their credit limit?” and you get a list with balances and overdue amounts.

Partner firms managing credit control for several clients can request custom approval rules and limit reports per client by booking a call at /book-a-demo or emailing hello@hellobooks.ai.