Credit and collections is the work of getting paid on time. You decide how much credit each customer gets, watch what they owe, and chase late payments before they grow into a loss.
A fuel seller usually delivers the fuel first and bills for it after. That means it is lending money to every customer who does not pay on the spot. Credit is the decision of how much you will let a customer owe at once. Collections is the daily work of making sure that money actually comes back in.
It runs in two parts. Up front, you check a new customer’s history and set a credit limit and payment terms, such as ten or thirty days to pay. After that, you track each account’s balance and how late it is, and you act early when one starts to slip, with a call, a hold on deliveries, or a tighter limit.
This matters more in fuel than in almost any business, because the margin is so thin. A jobber may make only a few cents a gallon, so the profit on thousands of gallons can be wiped out by a single customer who stops paying. Steady, firm collections is what keeps a busy company from delivering its way into a loss.
In useWhen a long-time account started paying a week late and then two, credit and collections caught it early and put the account on a tighter limit before the balance got dangerous.
See also Working capital, Margin leak