Q1: Why should we convert COD customers to credit terms?

COD is the right starting point with a new customer, but it was never designed as a permanent arrangement. Once a customer has demonstrated consistent behaviour, moving them to credit terms benefits both sides — it grows the relationship, increases order capacity, and removes operational friction from every transaction.

The main reasons to convert:

• COD restricts how much a customer can order — they can only buy what they have cash available for at the time of delivery, which caps their growth with you.
• Credit terms give the customer flexibility to manage their own cash flow more effectively and place larger, more planned orders.
• Customers on credit terms tend to place higher-value orders and have stronger long-term loyalty than COD customers.
• The move signals trust — it positions your business as a long-term partner, not just a transactional supplier.

Q2: What are the risks of keeping customers on COD long-term?

Beyond the missed growth opportunity, COD — especially for high-value orders — creates significant operational and security risks for your business.

• Driver security: Drivers carrying large cash amounts are at risk of robbery and hijacking. This risk increases when collection patterns become known to criminal networks.
• Internal theft exposure: Cash on hand creates temptation. Petty cash float for change adds further risk. Removing cash from the equation removes the opportunity.
• Reconciliation complexity: Short deliveries, incorrect invoices, and cash discrepancies at handover all require your driver to stop, resolve the issue on-site, and wait — slowing down the entire delivery run.
• Delivery scheduling constraints: COD customers can only receive deliveries when they have the cash available, not when it suits your route planning or their own ordering cycle.

Q3: Which COD customers should we target first for conversion?

Not every COD customer is a good first candidate. Start with the three segments most likely to make the switch successfully, as they carry the strongest indicators of credit-readiness and the clearest mutual benefit.

Q4: What signals tell me a COD customer is ready for credit terms?

Look for a pattern across five areas. A customer who ticks all five is a strong candidate; a customer who ticks only one or two warrants more caution.

• Payment consistency: 12 or more months of on-time, clean payments. No short payments, reversals, or last-minute excuses.
• Order behaviour: Regular, predictable orders with stable or growing volumes. Erratic ordering — large orders followed by long gaps — is a flag.
• Relationship tenure: You know how they operate and they know how you do. The working relationship has real depth on both sides.
• Communication quality: Responsive, professional, and easy to reach. Queries are resolved quickly and fairly.
• Business stability: No signs of financial distress, no sudden changes in key contacts, business appears to be operating normally.

Q5: What due diligence do I need to run before converting a COD customer?

Run the same four checks you would for any new credit applicant. A clean COD payment record with you does not replace a full credit assessment — a customer can be paying you perfectly while carrying delinquent debt elsewhere.

Four checks to run:

• Credit bureau report: Confirm they are not carrying delinquent debt with other creditors.
• Company registration (CIPC): Verify the business is still active and registered. Check for recent directorship changes — these can signal instability.
• Financial review: Request management accounts or audited financials to assess real financial health, not just the picture visible from your own trading history.
• Bank account verification: Confirm the account they pay from matches their registered business details. A mismatch should be understood before any credit terms are put in place.

Q6: What documents should I collect before extending credit terms?

A formal credit application is required even if you have been trading with the customer on COD for years. It establishes the legal basis of the credit relationship and creates a clear record of what both parties agreed to.

Document checklist:

• Completed and signed credit application form
• Trade references from at least two other suppliers
• Company registration documents (COR14.3 or equivalent)
• Director or owner identity documents
• Signed terms and conditions — as a separate document, not just a clause in the application
• Personal surety where applicable

Q7: How does Trade Shield support conversion decisions for COD customers?

A question raised during the live session: COD customers typically do not appear in your monthly debtors aging, which means Trade Shield's standard payment history data may be limited for these accounts. There are two ways Trade Shield can still support the conversion decision.

How Trade Shield helps:

• Net sales value data: If you share transactional (net sales value) data with Trade Shield rather than only debtors aging, the platform can track COD purchase history, order frequency, and order values — providing a behavioural picture even without formal payment terms. Contact your Trade Shield counsellor to set this up.
• Customer profiling: Where direct history is limited, Trade Shield uses payment risk, default risk, and customer profiling to generate a credit recommendation. Profiling compares the customer's characteristics against similar businesses in the dataset to model likely behaviour — even for customers with no prior credit relationship with you.
• Credit limit recommendation: Once you are ready to convert, Trade Shield can assist in structuring the opening credit limit within your risk adjustment framework — factoring in minimum and maximum limits, risk appetite, and the customer's profile.

Q8: How do I set the first credit limit and what payment terms should I start with?

Start conservative on both the limit and the terms. You can grow a credit limit — reducing it is a much harder conversation. Give the customer room to demonstrate good behaviour, and use the 90-day review to reward it.

Recommended starting approach:

• Credit limit: One to two times their average monthly COD order value is a practical starting point. Do not grant the full limit they request — build in room to increase it as a reward for consistent payment.
• Payment terms: Start at net 30 days. Do not open with 60- or 90-day terms for a first-time credit arrangement, even if you offer longer terms to other customers. Work up to longer terms through the review cycle.
• Document your reasoning: Record why you set this limit, at this point, based on what information. This baseline is valuable at the 90-day review.
• Set a 90-day review: Calendar it on the day you approve the account. Tell the customer upfront when it is and what you will be looking at.

Q9: What should I monitor in the first 90 days, and what are my options at the review?

The first 90 days are where the credit relationship is really established. Monitor actively, not passively — and use three structured decision gates rather than a vague end-of-quarter check-in.

What to monitor throughout:

• Days to pay: Track the exact number, not just on-time vs late. Consistent payment on day 35 of a 30-day account is an early problem to address.
• Invoice disputes: Occasional queries are normal. Disputes that consistently delay every payment are not.
• Order value changes: A sudden jump approaching the credit limit warrants a call before you fulfil the order.
• Communication responsiveness: Are they easy to reach? Does following up on a statement require chasing?
• First payment: Note the exact date and confirm it matches the invoice to the cent. Address any discrepancy immediately — do not wait for the next cycle.

Decision gates:

• 30 days: Has the first invoice been paid? On time? Any disputes?
• 60 days: Is there a pattern forming? Two consecutive late payments requires a conversation now, not at 90 days.
• 90 days (formal review) — three outcomes:
  • Expand: Strong performance — increase the limit or extend payment terms.
  • Hold: Mixed signals — maintain current terms and set a follow-up review date.
  • Revert: Concerning behaviour — reduce the limit or return to COD.

Q10: How do I position the move to credit in the conversation with the customer?

Frame it as a recognition of their track record — not a favour you are doing them. The customer has earned this through consistent behaviour, and the conversation should reflect that. Lead with the benefits to them, then be equally clear about what you need from them in return.

How to frame it:

• Open with recognition: "Based on how we have worked together, we think you are ready for credit terms. We have reviewed your account and want to offer this as a recognition of the relationship."
• Lead with what it means for them: flexibility in their cash flow, the ability to place larger planned orders, a stronger working partnership.
• Do not frame it as a favour. It is a business decision based on their demonstrated behaviour.

Be equally clear about your requirements:

• Payment terms: 30 days from invoice date — not from statement date. State this explicitly.
• Dispute window: Any queries on an invoice must be raised within 7 days of receipt.
• Credit limit: Orders that would exceed the limit require upfront payment for the excess amount.
• 90-day review: Tell them when it is, what you will be looking at, and what the possible outcomes are.
• Contact details: Who they contact for invoice queries, and who will follow up with them from your side.

Need more help?

The support team is ready to assist

support@tradeshield.ai

+27 (0) 10 753 1630

www.tradeshield.ai