In today’s wholesale market, competition is fierce. When a retailer asks for “better terms,” many suppliers feel they have little choice but to agree. Extending more credit can seem like the quickest way to win an order, keep a customer happy, or stay competitive.
But here’s the uncomfortable truth: more credit doesn’t always mean more sales. In fact, in 2025 it’s increasingly becoming a trap—one that quietly eats margin, strains cash flow, and leaves suppliers carrying all the risk.
The trend: extending terms to win business
Across Australia, New Zealand and the U.S., suppliers are loosening their credit policies. Atradius reports that over half of all B2B invoice value in Australia is overdue—a direct consequence of generous credit being handed out in a tough market.
Retail customers know this. They push for longer terms, bigger limits, and flexible arrangements because credit is effectively “free funding” compared to bank loans, which have become more expensive as interest rates climbed through 2024 and into 2025.
For wholesalers, however, every extra week of credit means more cash tied up in receivables, more risk of default, and more admin chasing payments.
The hidden costs of “more credit”
1. Bad debt risk
Every extension of terms increases the chance that an invoice goes unpaid. Atradius’ latest survey showed 11% of B2B invoice value in Australia written off as bad debt—a level high enough to erase the margin on many orders.
2. Cash flow strain
Longer credit cycles create cash flow mismatches. You’re paying suppliers, staff, and overheads now, but not getting paid until 30, 60, or even 90 days later. The result? A constant squeeze on working capital.
3. Administrative overhead
More credit equals more chasing. Finance teams spend hours on credit applications, reminders, and reconciliations—time that could be spent on higher-value tasks. Late-payment averages of 6+ days across Australia and NZ translate into thousands of wasted admin hours.
4. Opportunity cost
When capital is locked in overdue invoices, it can’t be used for growth: stocking faster-moving lines, investing in marketing, or taking advantage of supplier discounts.
Smarter strategies wholesalers are adopting
The good news: suppliers aren’t powerless. Many are starting to rethink credit—not as a blunt sales lever, but as a disciplined, data-driven tool. Here’s how PencilPay customers are leading the way:
Digital credit applications
Instead of chasing paperwork and trade references, wholesalers use PencilPay to onboard customers with a branded, digital credit application. It automatically validates details, screens risk, and secures a payment method up front—reducing admin and tightening credit control.
Risk-based terms (not one-size-fits-all)
Rather than handing every account “Net 30” by default, suppliers are segmenting:
- Deposits (20–50%) for new or higher-risk accounts
- Progress payments for larger orders
- Auto-billing on dispatch for stock orders
This protects cash flow while still supporting growth.
Automated payment plans
When customers hit cash flow trouble, the old model was: chase harder, threaten supply, or risk a write-off. PencilPay allows suppliers to instantly offer instalment plans with secured payment details—turning a likely bad debt into scheduled, automated payments.
Upfront deposits as standard
For many industries—furniture, construction supplies, packaging—requiring a partial deposit is becoming the norm. PencilPay makes this seamless: customers authorise card/bank payments at the credit application stage, and deposits can be collected automatically when the order is placed.
The mindset shift
It’s tempting to think of credit as the price of doing business. “If we don’t extend terms, our competitors will.” But in 2025, smarter suppliers are flipping the model:
- Credit is no longer the default—it’s earned.
- Terms are based on data, not gut feel.
- Cash flow comes first, not last.
By using digital tools like PencilPay to manage risk, automate collections, and secure payments, wholesalers can grow sales without giving away the shop.
Bottom line
Extending more credit might help you win an order today—but if it turns into a late or unpaid invoice, you’ve lost far more tomorrow.
More credit ≠ more sales.
The wholesalers who thrive in 2025 will be the ones who protect their cash flow, digitise their credit processes, and use automation to reduce admin and risk.
That’s exactly what PencilPay was built for.