Distribution is a thin-margin business that runs almost entirely on credit. Those two facts together define its operational risk.
A distributor working on single-digit margins needs to sell a great deal of additional product to recover one bad debt. Which means credit control is not an accounting function running behind the business — it is the business, and the decisions that matter are made at the moment an order is accepted, by someone who is usually not thinking about exposure.
Credit exposure has to be visible at order entry
The critical question is asked at the wrong time in most distribution businesses.
An order comes in. Someone takes it. The credit position — what this customer already owes, how overdue it is, whether this order takes them past their limit — is checked later, if at all, by someone in accounts who was not part of the conversation.
By then the goods may have shipped.
What is needed is narrow and specific: at the moment of order entry, the person taking it sees the customer's current outstanding, how much is overdue, and whether this order breaches their limit. Not a report. On the screen, in the moment.
That single change converts credit control from a monthly reconciliation into a decision made before exposure is created.
Limits have to mean something
A credit limit that can be silently exceeded is a suggestion. A limit that blocks an order with an override path — requiring someone with authority to approve, with the reason recorded — is a control.
The override matters as much as the limit. Real businesses have legitimate reasons to exceed a limit: a long-standing customer, a payment in transit, a strategic account. Blocking those absolutely means the system gets bypassed entirely. Requiring an authorised, recorded override keeps the exception visible.
This is the same argument as price and discount drift — individually defensible decisions that accumulate into an exposure nobody chose.
Ageing is only useful if it is current
Every distributor has a receivables ageing report. Fewer have one that is current enough to act on.
The gap is usually reconciliation: payments received but not yet allocated to invoices, credit notes not applied, part-payments sitting unmatched. Each leaves a customer looking more overdue than they are, or less.
The consequence is that collections calls are made on wrong information — chasing someone who paid, or not chasing someone who has not. Both damage the relationship and the cash position.
The requirement is that payment allocation is part of receiving payment, not a separate task done later. Where allocation is a batch job someone does weekly, ageing is a week stale by design.
Pricing in distribution is genuinely complex
This is one of the structural sector differences — not vocabulary — under the test in choosing technology for your sector.
Distribution pricing typically involves:
Customer-specific prices. Negotiated per account, sometimes per product.
Quantity breaks. Price changing with order size, and sometimes with cumulative period volume.
Scheme and rebate structures. Retrospective discounts based on achieving volumes — which means the true margin on a sale is not known at the time of the sale.
Supplier-funded promotions passed through, where the distributor's actual cost differs from the invoice price.
A system modelling one price per product will be worked around immediately, and the workaround will be manual price overrides — at which point nobody knows the real margin on anything.
The rebate point deserves emphasis: distributors frequently discover at period end that a customer they believed profitable was not, once accrued rebates were applied. Accruing them as they build, rather than calculating at settlement, is what makes margin visible in time to act.
Returns and claims are normal volume
In distribution, returns are not exceptions. Damaged goods, short deliveries, expired stock, wrong items — these occur continuously and each creates a credit note, a stock movement and a dispute.
Where the returns flow is undesigned, three things happen: credits take weeks to raise, customers withhold payment on entire invoices over one disputed line, and returned stock sits in an undefined state — which is where warehouse discrepancies begin.
Where this connects
Distribution is the sector where the argument for one shared record is strongest, because the chain is long: order, credit check, pick, dispatch, delivery, invoice, payment, allocation, return.
Every handoff between separate systems is a place the position becomes uncertain — and the position is what the business runs on. That is the architecture argument, and delivery specifically is covered in what delivery software has to get right.
What we have delivered
Warehouse, inventory, delivery and logistics management are among the ten systems Truffaire has built, alongside multi-outlet retail. Distribution operations sit squarely in that work.
The consistent finding is that distributors ask for better reporting and need earlier decisions. A perfect ageing report tells you about exposure that already exists. Showing the credit position at order entry prevents some of it from being created — which is worth more than any report.
Frequently asked questions
How do we set credit limits sensibly?
On payment history and the exposure you can absorb, reviewed periodically rather than set once. A limit agreed three years ago against a customer whose volume has tripled is not a control.
Should we stop supply to overdue accounts?
A commercial judgement rather than a systems one. What the system should do is make the position unmissable at the moment of the decision, and record who authorised any exception.
How do we handle rebates and schemes?
Accrued as they build, so margin reflects them before settlement. Distributors who calculate at period end regularly find that profitable-looking accounts were not.
Do we need distribution-specific software?
The pricing complexity and credit control are genuine structural requirements. Whether that needs a specialist product or a configured general system depends on whether your pricing rules can be expressed — the three-way choice covers how to decide.
What is the single highest-return change?
Showing credit position at order entry. It moves the decision to the only point where it can prevent exposure rather than describe it.
Where to start
Take your current receivables. For each overdue account, establish when the exposure was created and whether anyone knew the position at the time the order was accepted.
If the answer is mostly no, that is the gap — and it is a workflow change rather than a reporting one.
If you want a read on where your order-to-cash chain loses certainty, get in touch.