How many days of credit should a new customer get?

There is no legal figure. It depends on your industry, your margin and the cash you can carry. In practice a new customer should start with short credit and a low limit, then move up once there is a record of on-time payment. Write the same credit period in the quotation, the terms of sale and the invoice. A clear due date helps because, under section 204 paragraph 2 of the Civil and Commercial Code, a debtor is in default without a reminder when the due date is fixed by the calendar.

Can we ask the customer's director or owner for a personal guarantee?

Yes, but without written evidence signed by the guarantor you cannot sue to enforce the guarantee (Civil and Commercial Code section 680). A guarantee of future or conditional debts must state the purpose, nature of the debt, maximum amount and period (section 681). The law also protects guarantors: section 685/1 makes agreements that depart from certain key sections void, and section 686 requires the creditor to give the guarantor written notice within sixty days of the debtor's default. Draft to the statute and have a lawyer read the actual form before you rely on it.

If a customer is overdue, can we stop shipping new orders?

Yes if the terms of sale or contract give you the right in advance to suspend delivery when an account is overdue or over limit, and you exercise it by written notice. Without that term, stopping mid-contract may be treated as your own breach of the delivery obligation. Put the term in at account opening and have the contract of a large customer checked individually.

How long do we have to sue for unpaid goods?

A trader claiming the price of goods or work done generally has a two-year limitation period under section 193/34 of the Civil and Commercial Code. If the customer bought the goods for its own business, the exception in section 193/34 (1) takes the claim out of the two-year rule, and section 193/33 (5) gives it a five-year period. Which applies depends on the facts of each item. An acknowledgment of the debt or a part payment interrupts the period (section 193/14).

What interest can we charge if default interest was not agreed?

Without an agreed rate, default interest is the section 7 statutory rate of the Civil and Commercial Code plus 2 percent a year under section 224 for money debts. The section 7 rate can be adjusted by royal decree, so check the rate applicable for the period before each calculation. If you agreed a rate in writing it applies, but not above 15 percent per year (section 654), and a court may reduce a penalty that is out of proportion (section 383).

How Many Days of Credit Should You Give Customers, How to Set Credit Limits, and When to Stop Shipping

The core answer

No number of credit days is right for every business, but there is a right way to decide. Treat credit as handing your cash to the customer to use without interest, and limit it to what your margin and cash position can bear. A new customer should start with short credit and a low limit and move up on actual payment history, not on friendliness or the size of the order.

A workable policy has four parts: assess the customer before opening the account, set the limit with a written formula, define who approves exceptions and when shipping stops, and hold the documents (credit application, terms of sale, delivery proof signed by the customer and, where suitable, a guarantor) so that you can prove the debt when you have to chase it.

Every figure marked "hypothetical example" below only illustrates the method. Adjust it to your own industry and cash flow.

1. Credit terms are a cash decision

Every day of credit means money that is not in your account while you still pay for materials, wages and rent. This follows on from profitable but short of cash: a profitable business runs short of cash because the money sits in receivables.

Hypothetical example: sales of THB 3,000,000 a month is THB 100,000 a day. Extending credit from 30 to 45 days ties up another 15 x 100,000 = THB 1,500,000. If you borrow to cover it at a hypothetical 8 percent a year, the extra cost is about THB 120,000 a year, which must be weighed against the profit from that customer.

Three questions before agreeing credit:

Does the margin on this job cover the cost of money and the risk of bad debt?
If this customer pays 30 days later still, can we pay suppliers and wages?
How big is this customer against total sales? (One customer above a fifth of sales is a concentration risk.)

State what the credit period counts from: delivery, acceptance, or the customer's receipt of the invoice. If it is vague, customers count from whichever date suits them. For customers who will not sign acceptance, see delivered but the customer won't sign acceptance.

2. Assess a new customer before opening the account

A customer asking for credit on the first order should pass a minimum check before you ship.

Item	What to check	What you learn
Company affidavit	Name, address, registered capital, authorised directors and signing conditions. Ask for a copy issued within three months and cross-check with Department of Business Development data	Who can really bind the company
Age and financial statements	A company registered long ago that files statements steadily is more reliable. Look at revenue, profit, equity and short-term debt	Size of limit it can carry
Shareholders and true owner	Who owns it, other group companies, any earlier company closed with debts	Who should guarantee
Trade references	Ask for two or three suppliers who sell on credit and phone them about payment history	The real record, not a claim
Public information	Lawsuits, news, status, whether it really operates at the stated address	Warning signs
Authorised receiving signatory	Who receives goods, signs delivery notes and confirms balances	Receipt evidence the customer cannot deny

Some SMEs have no current financial statements. If so, lower the starting limit and add security: a deposit, post-dated cheques or a guarantor. Personal data you collect from directors, such as ID copies, must be limited to what is needed, disclosed for its purpose and kept securely under data protection law.

3. Set the starting limit with a formula

A simple starting formula:

Limit = expected monthly purchases x credit days / 30, then apply a cap

The cap is your own rule, for example a percentage of cash reserves or of monthly sales, and a new customer starts at half the formula.

Hypothetical example: a new customer says it will buy THB 300,000 a month on 30 days. The formula gives 300,000 x 30 / 30 = THB 300,000. Halved for a new customer: THB 150,000. The cap for new customers with no statements and no guarantor is THB 100,000, so the starting limit is THB 100,000. After three billing cycles paid on time, review upward.

Caution: real exposure is usually higher than the formula because of billing cycles. Billing at month end and collecting cheques early next month gives the customer more credit than the agreed days. Count days by the actual cycle, and count the limit as open orders plus invoices not yet due plus overdue invoices, not invoices alone.

4. Tier table: credit, limit and approver

Hypothetical example for an SME selling to other businesses:

Tier	Customer profile	Credit	Limit	Approver
D	New, no statements or references, or a bad record	Pay before shipment or deposit	None	Sales can decide
C	New customer that passed the minimum check	15 to 30 days	By formula, up to THB 100,000	Sales manager and accounts co-sign
B	At least 3 billing cycles paid on time, average lateness up to 5 days	30 days	Increase up to 50% of the existing limit at a time, up to THB 500,000	Finance and accounts manager
A	Regular customer over 12 months, never later than 15 days, verified statements	45 days	Above THB 500,000	Owner or managing director

The key rule: the salesperson should not approve the limit alone. Incentives differ: sales wants the sale, accounts has to collect. This builds on an approval authority matrix. Keep a record of who approved, when and why.

5. Use payment history to adjust the limit

Record these monthly for each customer:

Due date against the date cash actually arrived (average days late)
Highest overdue balance in the last 12 months
Number of bounced cheques, postponement requests and instalment requests
How often the customer disputes invoices, which can signal cash or receiving problems

Raise the limit after consecutive on-time payments and real growth in purchases; hold or cut it when lateness rises; review at least yearly even without problems.

Triggers for an immediate review

Event	Action
More than 15 days overdue (hypothetical example)	Freeze further limit, phone, review the tier
Any bounced cheque	Downgrade at once to pay-first or cash, notify the top approver
Change of owner, directors or premises	Get a new affidavit, check whether the existing guarantor remains, redo the application
Lawsuit or adverse news	Review immediately
Unusual spike in orders or a new delivery address	Verify who is ordering before shipping, in case of impersonation or a plan to take goods and disappear

6. Stop-ship rules and exceptions

Write the rules as a ladder every department sees (hypothetical example):

Three days before the due date, send a reminder statement.
From the first day overdue, phone or message. Accounts does this, not sales.
At 7 days overdue, send a written statement of account and ask for a payment date.
At 15 days overdue, or if the total exceeds the limit, suspend new shipments unless the customer pays the excess.
At 30 days overdue, send a demand letter and start to consider legal action (see section 9).

Who approves exceptions

Situation	Approver	Condition
Over limit by up to 10% with nothing overdue	Sales manager with accounts	No more than twice a year
Over limit by 10% to 30%	Finance and accounts manager	A written payment date
Over limit by more than 30%, or something already overdue	Owner or authorised director only	Record the reason; post-dated cheques or extra security
Shipping to a customer on hold	Owner or authorised director only	Cash before shipment

The right to stop shipping must sit in terms of sale the customer signed in advance (section 7). Without it, stopping in the middle of a contract with staged deliveries can be used by the customer as an allegation that you are in breach.

7. Legal documents to hold before shipping

Sections 2 to 6 carry no weight in court without paper. Assemble an account-opening file:

7.1 Credit application

Completed by the customer and signed by an authorised director (with the company seal if it has one). It gives the legal name, registration number, address, contacts, who may order and receive goods, the limit requested, references, and a statement that the information is true. Attach the affidavit and the directors' ID copies.

7.2 Terms of sale

At least:

Credit period and how it is counted (from delivery or from receipt of invoice), and payment method
Default interest and collection costs, with the rate agreed in writing and interest not above 15 percent a year (Civil and Commercial Code section 654). If you agree nothing, the statutory rate applies (section 10)
The right to suspend delivery and reduce the limit when overdue
How to dispute an invoice, for example within a set number of days after receipt
A penalty that is not out of proportion, because a court may reduce it (section 383)
Who may receive goods and sign delivery notes

A large customer's purchase-order terms may contradict yours. Check them as in a big customer sent us its contract.

7.3 Proof of delivery and acknowledgment of debt

Delivery notes signed by the customer, naming the recipient, date, items and quantity. For e-POD, keep data that identifies the person confirming, the time, and the record, which is admissible under the electronic transactions law, but agree the confirmation method with the customer beforehand.
Invoices or billing statements acknowledged by the customer, and periodic balance confirmations. A debtor who signs a balance confirmation, acknowledges the debt or pays in part interrupts the limitation period (section 193/14).
Purchase orders, confirming emails and price messages.

7.4 Guarantee by a director or owner

When the customer is a new company with little capital or no statements, ask for an individual guarantor such as a director or main shareholder. The debt of a company belongs to the company; shareholders and directors are not personally liable unless they guarantee.

Have a written guarantee signed by the guarantor. Without written evidence signed by the guarantor you cannot sue to enforce it (section 680).
If it covers future or continuing debts, define the debt and the scope clearly (section 681), for example a maximum amount and a period.
An agreement that makes the guarantor liable as a joint debtor is void, unless the guarantor is a juristic person that agrees to it (section 681/1). Otherwise a guarantor may ask that the debtor be pursued first, unless the debtor is bankrupt or cannot be located (section 688).
Guarantor protections. The creditor must give the guarantor written notice within sixty days of the debtor's default (section 686). If late, the guarantor is released from interest and ancillary charges arising after that point. Section 685/1 makes terms that depart from these key sections void, so a form that waives everything may not work. Have the guarantor read and understand it before signing.
A director who has resigned or sold shares may still be liable for what was guaranteed. See resigned as director or sold your shares. A guarantor may also withdraw a guarantee for future debts under the conditions in section 699, so track whether each limit still has a guarantor.

7.5 Retention of title (where suitable)

For clearly identifiable goods such as machinery, you may agree in writing that ownership does not pass until full payment. It works in practice only if you can trace and recover the goods, they are not resold or mixed with other goods, and bona fide third parties are not affected. It is therefore a poor fit for goods bought for resale or processing. Have a lawyer check the form first.

8. Common mistakes

Granting credit out of friendship, with no application and no written limit
Sales approves its own limits and then cannot collect
Agreeing credit by chat or orally while the invoice says something else, so the due date is unclear
No delivery note signed by the customer, or signed by someone without authority to receive, or an illegible signature
A broad guarantee form with no amount or period, or no notice within sixty days
Not reviewing the limit after a bounced cheque and shipping on because "they are an old customer"
Letting debts age near the limitation period and never asking for a written balance confirmation
Sending the demand late, after the customer has already collapsed and other creditors are ahead

9. Collection steps and limitation

A common sequence:

Reminder before and on the due date, by accounts.
Statement of account, asking the customer to sign the balance and state a payment date.
Demand letter from a lawyer stating the debt, interest, a deadline (often about 7 to 15 days) and the consequences. A demand matters for default under section 204 where the debt has no calendar due date. See our demand letter service.
Court claim if it remains unpaid. See debt collection, suing a debtor and enforcement and customers not paying for goods and services, which explain the steps and limitation.

Limitation of trade debts

Case	Period	Note
Trader claiming the price of goods or work done	Generally two years (section 193/34)	Runs from when payment could be demanded
Customer bought for its own business	Five years (section 193/33 (5)), because the exception in section 193/34 (1) applies	Depends on the facts of each item
Claim with no specific period	Ten years (section 193/30)

The period is interrupted when the debtor acknowledges the debt or pays in part (section 193/14) and starts again, so get written balance confirmations at intervals. A debtor's silence is not an acknowledgment. For old debts, speak to a lawyer before concluding the claim has expired.

10. Default interest if none was agreed

Without an agreed rate, the creditor may claim default interest at the rate set in section 7 of the Civil and Commercial Code plus 2 percent a year under section 224 for money debts. The section 7 rate can be adjusted by royal decree, so we do not state a fixed figure here. Whoever calculates must check the rate applicable for the period each time. Interest agreed in writing applies at the agreed rate, but not above 15 percent a year. Writing the rate into the terms of sale from the start avoids arguments later.