What Are Payment Terms and Credit Limit? How Are They Set in B2B Sales?

A payment term is the date on which the amount on the invoice will be paid. "30-day terms" means payment is expected 30 days after the day the invoice is issued. Terms can be defined in days (45 days), as a date (the 15th of each month) or by period (end-of-month close). If payment does not arrive when the term is due, that amount falls overdue.

A credit limit, by contrast, is about amount, not time. It is the highest point the open balance on a dealer's current account, that is the total unpaid debt not yet collected, can reach. For example, if Demir Ticaret's credit limit is ₺250.000, then the sum of this dealer's unpaid invoices, open cheques and new orders cannot exceed 250,000 lira. As the balance approaches the limit, there is no more room for new sales on terms.

The two concepts complement each other. The payment term determines how long the risk will stay open, while the credit limit determines how large that risk can grow at most. When long terms meet a high limit, the burden on the supplier increases, which is why the two are usually assessed together.

A credit limit is set not by a single formula but by reading several data points together. The items looked at most are: the dealer's average monthly turnover, past payment performance (do they pay on time or always late), time in the sector, and the collateral they provide. A general approach is to keep the limit close to the dealer's average one-to-two month purchase volume. For Yıldız Bayi, which buys ₺120.000 on average per month, a limit around ₺250.000 is considered reasonable.

Collateral raises the limit directly. If the dealer provides a mortgage, a letter of guarantee, a surety, or DBS (direct debit system (DBS)), the limit can be pulled up by the amount of the collateral. A new dealer working without collateral, on the other hand, starts with a low limit and short terms, increased gradually as a payment history builds.

Payment terms are mostly shaped by the sector standard, product group and the dealer's bargaining power. For fast-moving products 30 days is common, for slow-moving ones 60-90 days. In practice, suppliers define terms and a limit for each dealer one by one; because tracking this in Excel introduces errors, on platforms like B2BPro that keep current account and risk management on a single screen, each dealer's limit, open balance and remaining available amount are seen in real time.

When a dealer's open balance reaches the credit limit, a new order is automatically blocked or sent for approval. Say Demir Ticaret's limit is ₺250.000 and its open balance is currently ₺230.000. If the dealer wants to place a new ₺40.000 order, the total becomes 270,000 and a 20,000 lira limit overrun arises. The system either blocks this order or puts it in a "limit exceeded, awaiting approval" state.

From there, three typical paths exist. First, the dealer pays part of the open invoices, the balance drops, and the order opens on its own. Second, the sales manager assesses the risk and approves the order manually, that is the limit is temporarily stretched for that transaction. Third, the order is partly fulfilled up to the limit, and the remaining items are shipped once payment arrives.

The aim of this control is not to stop the sale but to prevent the uncollectable risk from growing. In a well-built system, the field sales team also sees the dealer's remaining limit on their phone, so no one writes an order in the field for a dealer whose limit is full for nothing. For dealers with an overdue balance, new shipments can be put on hold until offsetting and reconciliation are completed.