One of the quietest but most dangerous threats to a business is unmanaged credit. I have seen otherwise profitable businesses sink into cash flow crises, simply because they did not take credit management seriously. Not because the founders weren’t smart or the business model was not sound, but because cash tied up in receivables or lost in late payments became a silent saboteur. In an economy like Nigeria’s, where inflation is high and the cost of capital is rising, credit discipline is not optional. It is survival.
Mid-sized businesses, in particular, tend to underestimate just how damaging poor credit practices can be. Many are too eager to grow their customer base, so they extend credit terms without proper vetting. Others are so dependent on a few major clients that they become afraid to enforce payment timelines. I’ve seen both scenarios firsthand. The result? Strained cash flow, missed payrolls, compromised vendor relationships, and eventually, the need for emergency loans at unmanageable interest rates.
We need to rethink how we approach debt and credit, especially in Africa’s mid-market segment where access to capital is already limited.
The illusion of revenue
A company can be generating sales and still be cash-starved. That’s the illusion many founders fall for. Revenue looks great on the books, but if customers are taking 60 to 90 days to pay, and suppliers are demanding payment in 15, the business becomes a financial pressure cooker.
During my time in finance and cost control roles, I spent a significant portion of my time reconciling receivables, following up on overdue invoices, and reviewing aging reports that kept getting longer. What always struck me was how rarely credit terms were reviewed or adjusted, even when customers consistently defaulted. We kept supplying, hoping things would improve, but hope is not a strategy.
Credit should not be seen as a default setting. It is a privilege that must be earned, monitored, and, when necessary, revoked. Businesses must become more disciplined in how they structure credit relationships, both in granting it and in managing the credit they owe.
The other side of the ledger
It is not only about collecting money owed. Credit management also includes how a company handles its own debts. Delayed payments to vendors, overreliance on short-term loans, and weak cash flow planning can compound internal financial pressure.
At Cowry Asset Management, I was responsible for preparing management accounts, tracking payables, and monitoring vendor balances. I learned quickly that vendor trust is critical. Once that trust is broken, your leverage in negotiation disappears. You start paying higher prices, lose access to flexible terms, or worse, lose suppliers entirely.
The discipline to manage both sides of the credit equation, receivables and payables, is what separates stable companies from fragile ones. It is not about being overly conservative. It is about being intentional.
Building a credit framework
So how can African mid-sized businesses rethink credit management?
1. Define a clear credit policy
Many businesses operate without a documented credit policy. This is dangerous. A proper policy defines credit limits, approval processes, collection timelines, and penalties for late payment. It empowers your team to make decisions and sets expectations with customers.
2. Know your customer
Before extending credit, conduct basic background checks. This doesn’t have to be overly formal. Simple steps like requesting trade references, checking payment history, or setting trial periods can go a long way.
3. Automate where possible
Digital invoicing, payment reminders, and automated reconciliations reduce the risk of human error and ensure nothing falls through the cracks. Tools like QuickBooks, Xero, and other accounting platforms offer these features and are increasingly affordable.
4. Monitor and review aging reports
Every week, finance teams should review who owes what, for how long, and what is being done about it. If a customer consistently delays payment, have a conversation. Adjust their credit terms. Do not wait until the balance becomes uncollectible.
5. Improve vendor communication
Being open about your payment schedules, especially during cash flow dips, builds goodwill. Vendors are more likely to be flexible if you are proactive and transparent.
6. Match credit terms on both ends
If customers pay in 45 days and your suppliers need to be paid in 15, you are creating a structural mismatch. Try to align incoming and outgoing cash flows more closely to avoid shortfalls.
7. Train non-finance staff
Sales and operations teams often negotiate terms without considering the financial impact. A short workshop or training session on credit management can shift this mindset and improve cross-department alignment.
Real stories, real risks
I once worked with a mid-sized firm that grew quickly and secured several high-profile clients. On paper, it looked like a dream. In reality, those clients had 90-day payment cycles, and the business was paying suppliers every 21 days. They ran out of working capital within six months. They had to let go of staff, pause operations, and eventually seek emergency funding at double-digit interest. That deal never recovered its original value.
On the other hand, I’ve also seen businesses with modest growth outlast flashier peers simply because they had strong credit controls. One firm I worked with implemented automated invoice reminders, shortened its receivable period by 20 days, and renegotiated supplier terms to improve alignment. Their working capital doubled in under a year, and they avoided taking any short-term loans.
The interest rate environment
With Nigeria’s rising interest rates, the cost of borrowing is becoming a bigger concern. Businesses that rely heavily on credit without the discipline to manage it will face steep consequences. Missed payments will not just damage relationships, they will cost more in penalties and interest. This is where cash flow forecasting becomes crucial.
In my current role supporting cost assurance on large infrastructure projects, I work closely with commercial and finance teams to model payment timelines and monitor risk exposure. A one-month delay in a major receivable can have ripple effects across the entire project. That’s why we build buffers, plan contingencies, and ensure that controls are not just in place, but followed. It is not only about compliance. It is about business continuity.
Final thoughts
Debt is not inherently bad. In fact, structured debt can be a catalyst for growth. But undisciplined debt is a liability, and poor credit management can quietly erode the health of even the most promising businesses. We need to shift our mindset.
Credit is not just a financial transaction. It is a relationship. It must be managed with transparency, intentionality, and structure. The businesses that survive and scale are those that understand this early and build systems to reflect it.
In this environment, where volatility is the norm and capital is expensive, financial discipline is no longer a nice-to-have. It is a core competency. And credit management sits at the heart of it.
