How often should you review customer credit limits, dealer exposure and vendor risk?

By Gaurav Gupta, Founder & CEO, GGA India

Last reviewed: 9 November 2026

Direct answer. No Indian law sets how often a business must review trade credit or suppliers, so your policy must. GGA's suggested practice: tier accounts by exposure and importance — quarterly for the critical tier, twice a year for the material tier, yearly for the rest — and review at once when a trigger fires. The trap: a calendar with no triggers.

GGA India at a glance — counterparty intelligence

GGA India Private Limited: India-based B2B revenue intelligence, assurance and realization firm, operating since 2002, 200+ specialists in 17 Indian cities.
Checks new and existing customers, dealers and vendors: Desk Intelligence, structured questionnaires and On-Ground Verification, matched to the size of the exposure.
Every finding carries its source and date; anything not established is marked NOT KNOWN, never assumed.
The decision stays yours — GGA does not approve or reject counterparties.
Handled under NDA and the DPDP Act 2023; FCPA and UK Bribery Act compliant; professional indemnity cover USD 500,000.
Write to gg@ggaindia.co.in — a named specialist replies within one working day.

The problem: limits are reviewed by the calendar, but risk moves by events

A once-a-year review finds a problem months after it started, and spends equal effort on accounts that do not need it. Many credit policies say "limits reviewed annually" and stop there. Three things then go wrong.

Exposure grows without a decision. A customer buying ₹50 lakh a month on 60-day terms owes about ₹1 crore at any moment. At 90 days, with dispatches continuing, it owes about ₹1.5 crore: ₹50 lakh of exposure no one approved (arithmetic, not a client case). Unless the ERP blocks dispatch at the limit, and nobody overrides the block, the annual review is the first time anyone sees it.
The review arrives after the money has aged. GGA's own measure, by value from invoice date, shows collection rates falling from over 95% for invoices up to three months old to about 10% beyond three years (collection outcomes by invoice age). It describes GGA's engagements, not your book. A slip caught in its second month is worked while the invoices are young; one found at the next annual review may be most of a year old.
Effort is spread evenly. A ₹2 lakh retailer gets the same annual form as a ₹4 crore distributor. Vendors are often evaluated once, at onboarding, even after one becomes a single source.

What the rules require, and what they do not

No general rule fixes a review interval for trade credit, but several rules create dates worth using. GGA is not aware of any Indian statute or regulator requiring an ordinary company to review customer limits, dealer exposure or supplier risk at a set frequency.

Exhibit 1: Rules that bear on review frequency — what each requires and the review date it gives you

Rule	What it requires	Review date it gives you
Ind AS 109, simplified approach	Companies reporting under Ind AS measure the loss allowance on trade receivables at lifetime expected credit loss at each reporting date	Each reporting date: tie the customer review to it
RBI asset-classification norms (banks only)	A bank's cash credit account can turn non-performing if its limits are not reviewed or renewed within 180 days of the due date	None for you; lenders must re-review on schedule, trade creditors choose their own
ISO 9001:2015, clause 8.4.1	Certified companies apply criteria for evaluating, monitoring and re-evaluating external providers, and keep records	No interval set; you define one and evidence it
MSME Form 1 and section 37(2)(g), Income-tax Act 2025	Half-yearly report of dues to micro and small suppliers outstanding beyond 45 days (due 31 October and 30 April); late-paid dues deductible only in the year paid	Twice a year: re-check vendors' MSME status and dues
CGST Rules, rule 37A	Supplier reported your invoice but has not filed GSTR-3B by 30 September after the year-end: you must reverse the credit by 30 November; late reversal carries interest; re-claim once the supplier files and pays	Each September: check vendors' GST filing
Limitation Act 1963, section 18	A signed written acknowledgement made within limitation starts a fresh period	Yearly: signed balance confirmations

The frequency is therefore a policy choice: how much you stand to lose, and how fast the counterparty can change.

The solutions: set the rhythm by exposure, and let triggers override it

Five approaches are common; only a tiered calendar with written triggers matches effort to risk.

Exhibit 2: Ways to decide when a counterparty is reviewed

#	Approach	What it fixes	What it leaves to you	When it is enough
1	One annual review for every account	A documented yearly look that satisfies auditors	Slips between reviews; equal effort on unequal risk	Small books with few material accounts
2	Review only on request or after a problem	No effort wasted on quiet accounts	The customer who never asks for more but pays slower	Never alone for material exposure
3	Tiered calendar plus written triggers in your credit and vendor policy	Effort follows exposure; events start a review the day they occur	Running the tiers, watching the triggers, writing up each review	Most companies, if someone owns the watch
4	Data-provider monitoring alerts, or a credit insurer's own buyer-limit reviews	External changes flagged quickly	Your ledger evidence, channel or supply performance, the decision	As a feed into approach 3, not a replacement
5	GGA portfolio review, with drill-down on exceptions	Every account read against your trading data and public evidence; exceptions ranked	The decisions, which your authorised team takes	Large or fast-changing books; before a season, budget or policy reset

GGA's suggested practice — the tiers. These intervals are a working recommendation, not a legal or accounting requirement; adjust them to your margins, terms and industry.

Exhibit 3: Suggested review frequency by exposure and importance (GGA suggested practice)

Tier	Who belongs here	Ledger watch	Formal review	Public-record refresh
A — critical	Accounts making up the first half of your exposure, or whose loss would erase a quarter's profit; vendors that are single-source, slow to replace, or hold your advance or tooling	Monthly	Quarterly, and before any change of terms	GST filing and court search quarterly; MCA, charges and insolvency yearly
B — material	Accounts above the exposure threshold your policy sets; seasonal dealers; vendors you could replace within a quarter	Monthly exceptions report	Twice a year; seasonal dealers before each season	Twice a year
C — routine	Small, fully secured or advance-paying accounts; easily replaced vendors	Exceptions only	Yearly	GST status yearly

Move an account up a tier the moment it trips a trigger. Move it down only after a clean formal review.

Triggers that should start a review at once, whatever the tier.

Exhibit 4: Review triggers for customers, dealers and vendors

Source	Trigger	First response
Your ledger	Payment days up more than a week on the account's own 12-month pattern	Hold any increase; review within the month
Your ledger	Outstanding above 90% of the limit at three month-ends running, or dispatches over the limit	Raise with evidence, or enforce the limit
Your ledger	A returned cheque, a part payment in round sums, or a new type of deduction	Ask for the reason in writing; review the account
The counterparty	A request for a higher limit, longer terms, a new territory or an advance	Review before answering; treat the request as data
The counterparty	Refusal or delay in signing a balance confirmation	Reconcile and review; check your limitation dates
Public record	GST registration suspended or cancelled; recent returns missing	Review now; for vendors, check your input tax credit exposure
Public record	A new charge on MCA, a director or partner change, accounts not filed	Review ownership, borrowing and continuity
Public record	A cheque-bounce or recovery case by another supplier; an NCLT petition or IBBI announcement	Stop adding exposure until reviewed
Supply side	On-time delivery falling for three months, longer lead times, a request to pay a new bank account	Review continuity; verify any bank change independently

The 90% and "more than a week" tests are GGA working thresholds, not rules. Dealer signals are covered in signs your dealer is in trouble, supplier signals in signs your supplier is in trouble, and bank-detail changes in vendor bank account change fraud.

What you can do this week

Sort every customer and dealer by current outstanding. Mark where the running total crosses half of all exposure. Those names are Tier A.
Sort vendors by criticality, not spend. Single source, months to switch, advance held, tooling at their site: any one puts a vendor in Tier A.
Write the tier intervals and the nine Exhibit 4 triggers into your credit and vendor policy, each with a named owner and first response.
Put the rule dates from Exhibit 1 in the finance calendar: reporting dates, MSME Form 1 deadlines, the September GST check, year-end balance confirmations.
Run the first Tier A review now, starting with the accounts whose payment days have moved.

Why GGA: a review that ends in a decision, at the frequency the risk needs

Information is available. The decision is still yours. A calendar helps only if each review ends in a decision the credit committee can defend: keep, raise, cut, re-secure, dual-source or exit. GGA builds each review around it.

Your own data first. GGA reads your 12, 24 or 36 months of sales, collection, purchase and delivery data, where a slip usually shows before any public record changes.
Evidence before opinion; materiality before volume. A Tier C account with no change gets a line; a Tier A account with three triggers gets the full case.
Contradiction control. "The season was late" is tested against independent evidence; anything not established is recorded as NOT KNOWN.
Three layers. 30 seconds — the answer: the GGA View and the two to four facts behind it. 5 minutes — the case: only the evidence needed to defend it. Reference — the proof: schedules and an evidence register with source and date. Portfolios add an Excel action file.
The right service. Existing Customer Credit Review, Existing Dealer Review, Existing Vendor Review, or a Customer Portfolio Review from one data upload. See the executive-summary examples and the methodology.
When money is already slowing. Invoices stalled in a viable customer's approvals call for Revenue Assurance; overdue balances for Revenue Realization — on your instruction, with the same evidence file. See managing risk from first order to final payment.

Under an adopted credit policy, GGA applies it to an existing account's actual behaviour and shows the indicative limit and its basis. It does not approve limits, set your policy or give a rating.

What GGA would do

Five steps turn a flat annual review into a tiered calendar, with the first reviews done. Labels show sequence; elapsed time depends on when data arrives.

Day 1: agree the scope and the decisions. Customers, dealers, vendors or all three; current policy wording; who approves. You receive: a data request and a note of policy gaps.
Days 2–5: load and tier the book. Ledger and purchase data mapped and cleaned; every account tiered by exposure and importance. You receive: a draft tier list, with the reason for each Tier A account.
Week 2: run the triggers across the book. Payment-day drift, utilisation, returned cheques, delivery slippage, then GST, MCA, court and insolvency checks on the flagged names. You receive: an exception map ranking accounts that need review now.
Weeks 2–3: drill down on the exceptions. Questionnaire or On-Ground Verification only where agreed and where it could change the decision. You receive: an executive summary per exception account, with the GGA View.
Week 3: the review calendar. You receive: a draft calendar and trigger list for your committee to adopt or change, plus the action file for the exception accounts.

What we need from you

A month-end outstanding list and your current policy are enough for a first view.

To start

Customer and dealer list with current outstanding, limit and credit period
Vendor list with annual purchases and any advance or tooling held
Your current credit and vendor policy wording on reviews, even if it is one line
The decision in front of you: a policy reset, a season, a budget, or a worrying account

To act

12, 24 or 36 months of invoices, receipts and credit notes by account; purchase orders, receipts and delivery dates for key vendors
Security register with guarantee expiry dates, and the last signed balance confirmations
GSTIN, CIN or PAN for the accounts to be checked externally
Consent from counterparties for bureau data, and contacts for any questionnaire

Missing some of these? Send what you have — telling you what is missing is part of the first reply.

How you stay in control

GGA recommends the rhythm and does the reviews; your committee owns the policy and every decision.

The decision is yours. GGA does not approve or reject a customer, dealer or vendor, and does not set your credit policy.
GGA contacts a counterparty or visits its premises only as agreed with you.
Bureau data is obtained only with the counterparty's consent.
Every finding carries its source and date; NOT KNOWN is stated, never guessed.
Your data and the counterparty's personal data are handled under NDA and the DPDP Act 2023.
A material red flag found mid-review, such as a fraud or insolvency signal, is reported to you immediately.
Tier assignments and triggers are shown with their basis, so your committee can test and change them.

Send us your top 20 accounts by outstanding, with limits and terms, and the review question you face. Within one working day a named GGA specialist replies with what we would check first and what is missing from the file — no charge, no obligation. gg@ggaindia.co.in

Checking an overseas buyer? See the Global Receivables Desk. An overseas company checking an Indian counterparty? See India counterparty due diligence.

Frequently asked questions

How often should credit limits be reviewed?

By exposure and importance. GGA's suggested practice: accounts carrying the first half of your exposure quarterly, material accounts twice a year, small or secured accounts yearly. Any account that trips a trigger, such as slower payment, a limit request or a GST or court change, is reviewed at once.

Is there a legal requirement in India to review customer credit limits?

GGA is not aware of one for ordinary trading companies. Under RBI norms a bank's working-capital account can turn non-performing if its limits go unreviewed; that binds lenders, not suppliers. Companies under Ind AS measure expected credit loss on trade receivables at each reporting date, a natural point to review.

Is an annual credit review enough?

For a small, stable book, often yes. For material exposure, no: a slip that starts after one review is invisible until the next. Pair the annual review with monthly ledger exceptions and written triggers.

How often should suppliers be re-evaluated?

By criticality: single-source vendors and those holding your advance or tooling quarterly, replaceable vendors yearly. ISO 9001 requires certified companies to re-evaluate external providers but leaves the interval to them. Check GST filing each September and MSME status every half-year.

What should trigger an immediate credit limit review?

A request for more credit, payment days rising against the account's own pattern, high utilisation for several month-ends, a returned cheque, a refused balance confirmation, a GST suspension, a new charge, a director change, or a court or insolvency filing.

Sources

This page summarises the position as at 9 November 2026. Portal features, rules and thresholds change; check the current position before relying on any single source.