For many businesses, the holiday season represents both opportunity and risk. Sales surge as customers place larger orders to meet consumer demand, but the same season often exposes the cracks in cash flow management. Credit managers find themselves on the front lines of a familiar dilemma: approving big holiday orders for customers who are already bumping up against their credit limits. The question becomes, Do you extend flexibility and walk the wave of seasonal sales, or hold firm and risk losing the order?
The Seasonal Cash Flow Squeeze
The fourth quarter is notoriously precarious for accounts receivable. Customers that normally purchase modest volumes suddenly place orders two, three, or even five times larger than usual. While these transactions can look profitable on paper, they also stretch existing credit lines to the breaking point. For companies already carrying balances, this surge in orders can feel less like opportunity and more like a ticking time bomb.
Why Credit Lines Become a Flashpoint
Credit lines are not just numbers on paper — they reflect the financial discipline, payment history, and risk profile of each customer. When seasonal spikes push customers beyond those boundaries, the credit team must decide whether to:
- Raise the limit temporarily to capture seasonal sales.
- Hold firm and protect the company from overexposure.
- Negotiate alternate terms that strike a balance between sales and risk.
Each option carries consequences. Too much leniency can increase bad debt risk, while too much rigidity can frustrate sales teams and strain customer relationships.
Tools in the Credit Manager’s Toolbox
When faced with these decisions, the most effective credit managers don’t rely on guesswork. They use data and negotiation to guide outcomes. Some proven approaches include:
- Requesting updated financials before approving higher exposure.
- Offering partial shipments tied to progress payments.
- Requiring collateral or personal guarantees for unusually large orders.
- Using credit insurance or factoring to transfer some of the risk.
- Coordinating with sales to set clear expectations with the customer in advance.
These strategies allow credit teams to participate in seasonal growth while keeping protections in place.
The Role of Communication
One of the most overlooked aspects of handling holiday order surges is the importance of proactive communication. Customers often assume that past flexibility will continue, while the sales team assumes the credit team will “make it work.” By setting ground rules early in Q4 — and communicating them clearly to both customers and sales teams — credit managers can avoid last-minute confrontations when orders land on their desks. In fact, the best time to discuss seasonal credit is in late summer, before the rush begins.
Balancing Risk and Relationship
At the end of the day, extending credit is as much about relationship management as it is about financial metrics. Customers who see their credit partners as transparent and collaborative are more likely to cooperate when limits are reached. Similarly, sales teams that understand the reasoning behind credit decisions are more likely to support them, even when it means walking away from an order. The key is to present credit not as an obstacle, but as a partner in long-term growth.
Your thoughts and comments (nseiverd@cmiweb.com) are most welcome!
Nancy Seiverd, President
CMI Credit Mediators, Inc.
All Rights Reserved
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