Store Charge Accounts: Billing Contractors and Business Customers

On this page 7 sections

1. Should Your Store Offer Store Charge Accounts for Contractors?
2. Credit Limits, Net 30 Terms, and Application Forms
3. Accounts Receivable in Your POS: Tracking House Account Purchases
4. Monthly Statements and Autopay With Cards on File
5. Level 2 and Level 3 Data for Business Cards
6. Collecting Past-Due Balances
7. Next Steps for Your Store

Key takeaways

• A card-backed charge account gives trade customers the convenience of a house account and carries less credit risk for your store than open net terms.
• Put credit limits, authorized buyers, terms and late-payment rules in a signed application before the first ticket is written.
• Your POS should record account charges with PO and job details and produce aging reports, or it should sync cleanly with accounting software that does.
• Sending enhanced (Level 2 or Level 3) data on business card payments may lower interchange on qualifying transactions. Requirements vary by card network and have changed recently, so confirm current criteria with your processor.

At 6:30 a.m., the contractor counter fills up fast. A plumber needs fittings for a morning job. An electrician's apprentice picks up wire for his boss, and a remodeler grabs drywall screws and caulk. None of them wants to stop and pay at the register. That is why hardware, lumber, plumbing, electrical, paint and specialty supply stores offer store charge accounts for contractors. This guide covers how to decide whether house accounts fit your store, how to set terms and credit limits, and how to track account purchases in your POS. It also covers billing monthly with card-on-file autopay, how enhanced data may lower costs on business cards, and how to collect when an account falls behind.

Should Your Store Offer Store Charge Accounts for Contractors?

Trade customers buy differently from walk-in shoppers. They come back often and buy for several jobs at once. They also send crew members to pick up materials. Their own customers may not pay them for weeks. A house account fits that reality: the crew signs a ticket, and the contractor pays once a month.

The benefits are real:

• Loyalty. A contractor with an open account at your store has a reason to stay instead of shopping around for every order.
• Bigger, steadier tickets. Pros tend to buy in volume and return throughout the building season.
• Faster counter service. Your early-morning line moves faster when nobody is digging for a card.

So are the costs:

• You are extending credit. When you sell on net terms, your store finances the job until the bill is paid.
• Cash flow strain. Inventory goes out the door weeks before cash comes in, often during your busiest months.
• Administrative work. Applications, statements, payment posting and follow-up take staff time.

Three Ways to Structure House Accounts in Retail

Most stores pick one of three models, or mix them by customer:

A common approach is to start every new trade customer on a card-backed account and offer open terms only after a period of on-time payment.

Credit Limits, Net 30 Terms, and Application Forms

Before anyone charges a single box of nails, get a signed application. It records what the customer agreed to, and it gives you the information you need to approve or decline the account.

What to Include on the Application

• Legal business name, DBA, address and EIN
• Business structure and years in business
• Owner or principal names and contact information
• Contractor license number, if your state licenses that trade
• Trade references (other suppliers) and a bank reference
• Resale or tax-exemption certificates, if the customer claims exempt purchases
• A list of authorized purchasers, and how the customer will add or remove names
• A personal guarantee, if you require one
• Your payment terms, late-payment policy and credit limit
• Authorization to charge a card on file, if the account is card-backed

If you plan to check a guarantor's personal credit, get written consent and follow applicable law. Late fees, finance charges and personal guarantees are governed by state law. Have an attorney review your application and terms before you use them. This article is general information, not legal advice.

Setting Terms and Limits

Net 30 terms in retail usually mean the full statement balance is due 30 days after the statement or invoice date. Some stores use net 15 or "due on receipt of statement" instead. Some also offer an early-payment discount, such as a small percentage off for paying within a set number of days. Write down exactly which date starts the clock, because "30 days from what?" is a common source of disputes.

For credit limits, start conservatively and raise them based on payment history, not on how much the customer says they will buy. A simple policy might look like this (illustrative only):

1. New accounts start with a modest limit and a card on file.
2. After several months of on-time payment, the customer can request a higher limit.
3. Open terms without card backing require a longer history and strong references.
4. Any account more than 30 days past due is placed on hold automatically.

Accounts Receivable in Your POS: Tracking House Account Purchases

A house account is only as good as the records behind it. When a contractor questions a large statement, you need to show who picked up what, when, and for which job.

What Your POS Should Capture on Every Account Sale

• Customer account selected from a lookup, not typed in by hand
• Authorized buyer name, checked against the approved list (some stores use an ID check or an account PIN)
• PO number and job name or address, so the contractor can bill their own customer
• Itemized line detail with quantities and prices, including any contractor pricing tier
• Tax treatment, applying exemptions only when a valid certificate is on file
• Signature on the ticket or on the terminal screen

Controls That Prevent Problems

Set the POS to warn or block when a sale would push an account over its credit limit or when the account is on hold. Restrict who can override those warnings. Returns of unused materials should be credited back to the account against the original ticket. That keeps the statement accurate and avoids handing cash to a crew member for an account purchase.

Not every retail system handles accounts receivable in the POS well. Some track house account charges and aging natively. Others record the charge as a tender type and rely on accounting software for invoices and statements. If you are shopping for a system, ask vendors to demo house accounts specifically. Our guide to the best POS systems for retail stores covers what else to evaluate. MannyPay offers retail POS systems and a QuickBooks integration for stores that keep receivables in their accounting software.

At minimum, you want an aging report that shows each account's balance broken out as current, 1–30, 31–60, 61–90 and over 90 days past due.

Monthly Statements and Autopay With Cards on File

Building a Statement Customers Will Pay

Pick a fixed statement cycle, such as closing on the last day of the month, and send statements promptly. A statement that gets paid without a phone call usually includes:

• Previous balance, payments received, new charges and credits
• Each ticket's date, number, PO, job name and buyer
• Copies of signed tickets, or a link to them
• The due date and accepted payment methods
• Any early-payment discount or late-payment terms

Email statements as PDFs. Many contractors forward them to an office manager or bookkeeper, so make the job and PO detail easy to read.

Setting up Card on File for Business Customers

Card on file for business customers turns a house account into a low-maintenance billing system. The contractor picks up materials all month, and on the due date your store charges the business card for the statement balance.

To do this properly:

1. Get written authorization. The agreement should say what you will charge (for example, the full statement balance), when you will charge it, and how the customer can update or cancel the card. Card networks have rules for stored credentials and merchant-initiated charges, so ask your processor what disclosures and transaction flags your setup requires.
2. Store the card securely. Save it as a token in your payment gateway or POS, never on paper or in a spreadsheet. Our guide to PCI compliance for retail counters, phones and back offices explains why.
3. Send a pre-charge notice. A short email a few days before the charge gives the customer time to question a ticket before the money moves.
4. Email a receipt and post the payment against the specific invoices it covers.
5. Plan for declines. Business cards expire, get replaced or hit their limits. Ask whether your gateway offers an account updater service, and have a set process for retrying and contacting the customer.

You can run these charges through a virtual terminal for keyed and card-on-file payments or through a payment gateway that supports stored cards and recurring billing. Keyed and stored-card charges are card-not-present transactions, which usually carry different pricing and fraud rules than in-store dips and taps. See card-present vs. card-not-present fees and rules for the details.

Some stores offset the cost of accepting cards on account payments with a compliant pricing program. Surcharging is restricted in some states and by card brand rules, so review how cash discount, surcharge and dual pricing programs differ, and confirm current rules before you add a fee.

Level 2 and Level 3 Data for Business Cards

Many contractors pay with business, corporate or purchasing cards. These cards often carry higher interchange than consumer cards. Card networks have offered lower interchange categories on some commercial card transactions when the merchant sends additional transaction details, often called enhanced data. Network treatment of that data has changed recently, though, and on some networks reduced rates may now depend mainly on full Level 3 line-item data rather than Level 2 alone.

Supply stores have an advantage here, because the POS already holds the line items, PO numbers and tax amounts that Level 3 calls for.

A few cautions before you count on savings:

• Requirements vary by network and change. Whether a transaction qualifies depends on the card type, the card network, the data submitted and current network rules. Confirm current criteria with your processor rather than relying on older guidance.
• Your equipment must send the data. Some terminals and gateways support Level 2 only. Level 3 usually requires a gateway or POS integration that passes line items. Because some networks now tie reduced rates mainly to Level 3 data, a Level 2-only setup may not capture the savings you expect. Ask your processor which levels qualify on each network.
• Your pricing model matters. Under interchange-plus pricing, lower interchange flows through to your statement. Under flat-rate pricing, you may not see any difference. Our breakdown of retail credit card processing fees explains how each model works.

If business cards make up a large share of your account payments, request a statement review and ask specifically about Level 3 support and which networks reward it.

Collecting Past-Due Balances

Even good customers fall behind when their own clients pay late. A written, consistent process protects the relationship and your cash.

A Sample Collection Schedule (Illustrative)

Practical Tips

• Separate disputes from nonpayment. If one ticket is contested, pull the signed copy and settle it quickly so the rest of the balance gets paid.
• Watch for early warning signs. These include partial payments, new buyers you don't recognize, and sudden large orders from a slow-paying account.
• Know your lien rights. In many states, material suppliers on construction projects may have mechanic's lien or payment bond rights, but these usually come with strict notice deadlines that begin when materials are delivered. Talk to an attorney about how this works in your state before you need it.
• Convert slow payers to card-backed accounts as a condition of lifting a hold.

Track your receivables alongside sales. A 13-week cash flow forecast built from your sales data shows how much of your cash is tied up in house accounts, especially during peak building season.

Next Steps for Your Store

Start small. Write a clear application and terms sheet, have them reviewed by an attorney, and launch card-backed accounts with a handful of your best trade customers. Confirm that your POS records buyers, POs and jobs, and that it produces an aging report. Then check whether your processing setup supports stored cards, recurring charges and the enhanced data, especially Level 3 line items, that card networks currently look for on business cards.

MannyPay works with hardware, supply and specialty stores on retail payment processing, POS hardware and gateways. To review your current setup, request a free quote, and a MannyPay specialist will respond within one business day.

ME

About the author

MannyPay Editorial Team

Beyond the Swipe's editorial desk researches the publication's guides and news and cites its sources in every article. Articles reviewed by a named MannyPay editor carry that editor's byline.

This article is for general educational purposes and is not legal, tax or financial advice. Card network rules and state laws change; confirm current requirements for your business.