Trade accounts2 min read · Updated
Contractor charge accounts: credit limits, net-30 terms and getting paid
How hardware stores run contractor charge accounts: setting credit limits and pay terms, trade pricing, statements, and keeping overdue balances small.
By Hardware Store POS Editorial Team · Published Key takeaways
- Contractors are the most valuable and most risky customers a hardware store has.
- Give every account a written credit limit and pay term, enforced at the till.
- Use price groups for trade pricing so the counter never improvises discounts.
- Review overdue accounts weekly; statements monthly.
A good contractor account can be worth more than a hundred walk-in customers. A bad one can wipe out a month’s margin. Contractor charge accounts (house accounts, trade accounts, or khata in Pakistan) work when three things are true: the limit is written down, the counter can see it, and somebody looks at overdue balances every week.
What a trade account needs
| Setting | What it does | Typical value |
|---|---|---|
| Credit limit | Most the customer may owe | Two to four weeks of purchases |
| Pay term | Days until each invoice is due | 30 days (or 7 for new accounts) |
| Price group | Their trade prices | Trade −10% or a set price list |
| Tax status | Exempt with certificate (US) or TRN/NTN on invoices | Per account |
| Authorised buyers | Who may sign for the account | Names in the notes |
In Hardware Store POS, credit limit and pay term live on the customer; price groups apply automatically when the account is picked at the till. See trade accounts.
Opening an account: the application
Ask every contractor for a short application: company name, owner, tax number, two trade references, expected monthly spend and the people allowed to buy on the account. It takes five minutes and gives you something to point to when a balance goes wrong.
Setting the limit
A simple rule: start at roughly two weeks of expected purchases, then review after three months. Raise it for on-time payers; hold it or lower it for late payers. Don’t let the limit be “whatever they ask for”.
Trade pricing without improvising
Discounts given by memory at the counter leak margin. Two cleaner options:
- Customer group with a percentage (e.g. Trade 10%) applied to normal prices.
- Selling-price group with set trade prices per item, for items where a flat percentage doesn’t fit (cement, rebar, pipe).
Pick one per customer so the counter never has to think about it.
At the counter
When the contractor (or their crew) buys, the cashier chooses the account, the trade prices apply, and the sale is finalised as due. If it would push the account over its limit, the POS warns, so the cashier can take a part payment or call a manager. The credit test rig shows exactly that.
Getting paid
- Weekly: look at who is overdue and by how much. Call the 30+ day balances.
- Monthly: send statements from the customer ledger (PDF by email or WhatsApp).
- On payment: record one payment and allocate it to the oldest invoices first.
When an account goes bad
Lower the limit to the current balance so no new credit is extended; ask for a payment plan in writing; and keep selling for cash if the relationship is worth keeping. The aim is a small, controlled problem rather than a large surprise at year end.
Contractors are also your best marketing
Many contractors don’t have a decent website. Our sister studio Contractor Web Studio Hub builds them; passing that on is a cheap way to strengthen the relationship.
Related: Quotes to invoices for contractors · Set up contractor accounts (help)
Questions readers ask
- What credit limit should I give a new contractor?
- Start small, roughly what they would buy in two weeks, and raise it after a few months of on-time payment. Get a signed trade account application first.
- What does net 30 mean?
- Payment is due 30 days after the invoice date. Some stores use end-of-month terms instead; pick one and apply it consistently.
- Can I stop a contractor buying when they are overdue?
- The POS warns when a sale would pass the credit limit. Many stores also lower the limit to the current balance while an account is overdue.
About the author
Hardware Store POS Editorial Team
The team that documents Hardware Store POS for hardware and building-supply retailers in the USA, the UAE and Pakistan.
- Written from the product's live configuration screens
- Reviewed against the published tax authority sources linked in each article
