How to Set Customer Credit Limits: A Policy for UAE Suppliers

Most UAE suppliers set credit limits by feel. A buyer asks for 60 days, the sales team wants the order, and the limit becomes whatever the last invoice happened to be. That works until one customer quietly becomes a quarter of your receivables.

A credit limit is simply the maximum amount you are willing to have outstanding with one customer at any moment. Setting it deliberately is one of the cheapest cash flow controls available to a growing business, and it costs nothing but an afternoon of work.

Why limits matter more in 2026

Selling on credit is now the norm here, not the exception. Atradius reports that businesses in the UAE conduct an average of 47% of B2B sales on credit terms, that about three in five companies offer terms of up to one month, and that roughly one in three offer terms of one to two months. The same survey finds that delayed payments are reported by almost all companies, with around two in five invoices settled late (Atradius Payment Practices Barometer, UAE 2026).

Read those two facts together. Half your revenue is lent to customers, and a large share of it comes back late. Without a limit, your exposure to a single buyer grows every time they order and every time they pay slowly, which are usually the same customers.

The VAT problem nobody budgets for

There is a specific UAE reason to keep exposure tight. VAT is due on the supply, not on the payment. The standard rate is 5%, registration is mandatory above AED 375,000 of taxable supplies and voluntary above AED 187,500, and returns are filed monthly or quarterly depending on what the Federal Tax Authority allocates to you (see the Federal Tax Authority, with the thresholds and filing frequency summarized by PwC Worldwide Tax Summaries).

In practice, you can find yourself remitting the VAT on an invoice before the customer has paid you a dirham of it. On AED 1 million of unpaid invoices, that is AED 50,000 of your own cash funding somebody else's payment cycle. Our VAT calculator makes the number concrete for your own invoice values.

A four step credit policy you can actually run

1. Set a total credit ceiling first

Start from the top down. Decide how much of your working capital you can afford to have sitting in receivables at any time, then treat that as the pool. If your business can carry AED 2 million of receivables comfortably, that number, not the sales pipeline, is the constraint. Anything beyond it needs financing rather than optimism.

2. Cap any single customer

A common rule of thumb is that no single buyer should hold more than 10% to 20% of your total receivables pool. Concentration is what turns one late payer into a payroll problem. If a customer genuinely needs more, that is a commercial decision made by the owner, not a default that happens through repeat ordering.

3. Tie the limit to observed behavior, not to promises

New customers start small: one order, shorter terms, then a review. Existing customers earn increases through payment history. Useful inputs include their average days to pay versus your stated terms, whether they dispute invoices near the due date, how long they have traded in the UAE, and their trade license and audited accounts where you can get them. Track the payment behavior yourself, because it is the only input you own and it predicts the next 12 months better than any brochure.

4. Write down what happens at the limit

A limit only works if the answer at the breach point is decided in advance. Typically: new orders ship only against payment of the oldest invoice, or on prepayment, or with an approved exception from a named person. If the rule lives only in the founder's head, the sales team will keep overriding it.

Review the policy on a schedule

Credit limits go stale. Set a quarterly review where you list every customer, their limit, their current balance, and their average days to pay. Two things fall out of that list immediately: buyers who deserve more room, and buyers whose limit should quietly come down before the next big order. Our guides to credit risk management and calculating DSO cover the measurement side in more detail.

When the limit blocks a good order

This is the frustrating part of a disciplined policy. A strong, growing customer hits their limit and you either turn down revenue or take on concentration risk you decided against. Neither is a good outcome, and it is the reason many SMEs abandon credit limits entirely.

The third option is to stop funding the terms yourself. Access to finance remains a defining constraint for small and medium businesses worldwide, which the World Bank notes represent around 90% of all businesses and more than half of global employment. Receivables based options exist precisely for this gap, and Atradius lists receivables financing among the tools UAE firms use to protect cash flow while staying commercially flexible.

This is where Comfi's B2B payment terms fit. Your buyer takes 30, 60, or 90 days, and you are paid within hours of the invoice being approved. The order goes through, and it does not consume your own credit ceiling, because the receivable is no longer sitting on your balance sheet waiting. Eligibility is straightforward: UAE-registered, B2B, at least six months of operating history, and AED 300,000 or more in monthly revenue.

Start this week

You do not need software to begin. Export your open invoices, sort by customer balance, and look at the top five. If any one of them is more than a fifth of the total, you already have your first limit to set. Write the ceiling, the per customer cap, and the rule at the breach point on a single page, and share it with whoever takes orders.

If the limits keep blocking orders you want to accept, the constraint is funding, not policy. Talk to us about paying your buyers' terms without carrying them yourself.