House accounts: limits, statements, aging, finance charges

A house account is a store-issued line of credit that lets a trusted customer charge purchases and pay later on a monthly statement. You will also hear it called a charge account, and the two names mean the same thing: your store is acting as the bank, in a small and neighborly way, for the people who keep your lights on.

It is the most generous thing a supply store does with money, and the easiest to let drift. One month you are doing a favor for a good contractor, and eighteen months later you are staring at a five-figure receivable held together by paper tickets, a spreadsheet, and memory. The fix is not complicated, because a house account program runs well on four habits: a written application with a limit and terms, a statement that goes out on the same day every month, an aging report somebody reads every week, and a finance-charge policy the customer agreed to in writing and your state allows. This guide walks through each one.

What a house account is (and who gets one)

A house account, or charge account, is credit you issue yourself, not through a card company or a bank. The customer checks out at the counter or the yard without paying, the sale lands on their account, and they settle up when the statement arrives at the end of the month.

At an independent supply store, the usual account holders are contractors who buy every week, property managers who need parts on demand, farms and ranches whose cash arrives with the season, and institutional buyers like schools, churches, and municipalities that pay by check on a cycle. Most stores also carry a handful of longtime homeowners, the folks who have been shopping with you since before your point of sale had a screen.

That last group matters more than it looks, because an account's purpose decides which federal rules apply to it. Credit extended primarily for a business, commercial, or agricultural purpose sits outside most of the federal Truth in Lending rules, while a homeowner's personal account can fall inside them. Keep that distinction in your back pocket; it comes back when we get to finance charges. If you want the vertical deep dives, we wrote separate pieces on charge accounts for paint stores, where net-30 painters are the whole game, and on farm charge accounts and seasonal terms, where the harvest sets the calendar.

Setting credit limits and terms

Every account starts with a written credit application, even for the contractor you have known for twenty years. Get the legal business name, the owners or principals, a list of authorized buyers, a couple of trade references, a resale or tax-exempt certificate if they have one, and a signature on your terms, including any finance charge you intend to assess. That signature is your written record that the customer agreed to the terms before the first charge ever lands on the account.

Start the limit small and raise it with history. A new account might get $1,000 or $2,500, and after six months of paying on time you have earned the confidence to go higher. Net 30 is the common term, meaning the statement balance is due within thirty days; net 60 and net 90 exist, usually for accounts with seasonal income or institutional payment cycles.

Two habits save the most grief. First, keep an authorized-buyer list on every account, so the counter knows who can charge and who cannot. Second, require a PO or job reference on each sale where the customer asks for it, so the purchase lands on the right job in their books and your invoice matches their records. When someone hits their limit, the register should flag it, and the answer is a conversation: take a payment to free up room, or review the account and raise the limit if their history supports it.

One rule worth knowing when you say no: Regulation B, which implements the Equal Credit Opportunity Act, covers business credit too. If you deny an application from a business with gross revenues of $1 million or less, you have to tell the applicant the action you took, orally or in writing. For larger businesses and trade credit, you notify within a reasonable time and give written reasons only if the applicant asks in writing within 60 days. The general deadline is 30 days after a completed application (12 CFR 1002.9).

Monthly statements (statement of account)

The statement, sometimes called a statement of account, is the heartbeat of the whole program. A good one shows the previous balance, each new charge with its date and invoice number, payments and credits received, any finance charge assessed, the new balance, the due date, and an aging summary so the customer can see at a glance how much of what they owe is current and how much is drifting.

Statements come in two flavors. A balance-forward statement rolls the prior balance into one opening line and lists only the new activity. An open-item statement lists every unpaid invoice individually, which contractors tend to prefer because it lets them reconcile against their own job records and pay specific invoices. Either works; what matters is that you pick one and stay consistent.

Consistency is the whole trick. Statements should go out on the same day every month, whether that is the 1st or the 25th, because customers build their own payables cycle around yours. A statement that arrives on the 3rd one month and the 12th the next trains people to pay you late. Email is faster and cheaper than mail and gives you a record of delivery, but some of your best accounts still want paper, so plan to offer both.

If you carry consumer open-end accounts, meaning personal-purpose accounts where you assess a finance charge, Regulation Z's periodic-statement rules can apply once your store meets the creditor test covered below. They call for items like the previous balance, each transaction, credits with dates, the periodic rates and the corresponding annual percentage rate, the balance the finance charge was computed on and how, the finance charge itself, the closing date and new balance, and an address for billing-error notices (12 CFR 1026.7). Most of that is what a good statement shows anyway.

How to read an AR aging report, with a worked example

An accounts receivable aging report breaks your outstanding balances into buckets by how overdue they are: Current, 1-30, 31-60, 61-90, and 90+ days. It is the single most useful report in a house account program, and the goal is to keep your book aging gracefully, with the money clustered on the left side of the page. Here is a sample book with made-up illustrative accounts:

Read it from the right side first, because the largest balances in the oldest buckets are your first calls. Pike Street Handyman owes $1,720 and $1,300 of it is over 90 days, with nothing current at all, which says they have stopped buying and stopped paying. That is the phone call you make Monday morning.

Dunmore Fence Co. is the quieter problem. Their $2,750 is spread across three buckets, which means the money coming in is not keeping up with the money going out. They are paying, but each payment covers less than the new charges, and the balance is drifting rightward a month at a time. M. Ortega's $180 in the 1-30 bucket is probably a forgotten statement, the kind a friendly reminder fixes in one call. Ridgeline Remodeling is fine: a big current balance with a small tail in 1-30 is what a healthy contractor account looks like.

For the book as a whole, a published guide on AR aging offers a useful rule of thumb: a healthy book keeps roughly 80% or more current and under 10% in the 90+ column, the 31-60 bucket is a first alert, and 61-90 is a problem. This sample book sits at 51% current and 15% over 90, so it needs work. Read your own report every week, because a balance that moves from 31-60 to 61-90 while you were not looking is much harder to collect than one you caught early.

Finance charges and late fees: how they are calculated

A finance charge is a periodic rate multiplied by the balance subject to the charge. As a pure arithmetic illustration, a 1.5% monthly periodic rate on a $1,000 past-due balance produces a $15 charge, and 1.5% a month works out to an 18% annual percentage rate. That 1.5% is an arithmetic example only, not a recommended rate and not a statement about what is legal where you operate.

Two design choices change how the charge behaves. With a simple charge, next month's calculation uses the balance without last month's finance charge folded in; with compounding, the charge is calculated on a balance that includes prior finance charges, so the $15 from last month starts earning its own charge. Systems also differ on the balance they use: an average daily balance method looks at what was owed across the whole cycle, while a past-due-balance method charges only on the amount that crossed the due date unpaid. A late fee is a different animal: a flat dollar amount charged when a payment is late, rather than a rate applied to a balance.

Whether any given rate or fee is allowed depends on your state's usury and retail-credit laws and on what the customer agreed to in writing. Check your state's statute or your banking and consumer credit regulator, ask the attorney general's office if anything is unclear, and have a professional review your terms before you print them on an application.

Which rules apply

At the federal level, Regulation Z (Truth in Lending) defines a "creditor" as a person who regularly extends consumer credit that is subject to a finance charge or payable by written agreement in more than four installments, where "regularly" means more than 25 times in the preceding calendar year, or more than 5 times for credit secured by a dwelling (12 CFR 1026.2(a)(17)). Open-end credit under the same regulation is a plan where the creditor reasonably contemplates repeated transactions, may impose a finance charge from time to time on the outstanding unpaid balance, and makes credit available again as the balance is repaid, which is the exact shape of a house account with a finance charge on consumer purchases.

The key exemption: Regulation Z does not cover "an extension of credit primarily for a business, commercial or agricultural purpose" (12 CFR 1026.3(a)). So your contractor accounts are generally outside Reg Z, while a homeowner's personal account with a finance charge can be inside it if your store clears the 25-times test.

States layer their own rules on top. Texas, for example, regulates retail charge agreements under Finance Code Chapter 345, which provides that "on the request of a retail buyer or prospective buyer, a retail seller or credit card issuer may establish a retail charge agreement," and whose definition of "goods" covers property bought primarily for personal, family, or household use, expressly including construction materials used to improve real property. A Texas hardware store's homeowner account buying lumber for a deck sits squarely in that chapter's territory. Every state writes its own version, so read yours.

One more federal law for the collections stage: the Fair Debt Collection Practices Act covers third-party debt collectors collecting consumer debts, meaning obligations primarily for personal, family, or household purposes. It excludes your own officers and employees collecting in your store's name, though a creditor that collects under a name suggesting a third party becomes covered.

Collections etiquette

Collecting on house accounts is mostly about rhythm and tone. Send statements on time, every time, because you cannot expect prompt payment on a late statement. When an account crosses into 31-60 days, make a friendly call, and make it a person rather than a letter: "Hey, your statement shows a balance drifting past thirty days, is everything okay on your end?" Half the time the check was lost, the bookkeeper changed, or the statement went to an old email address.

Give collections to one person. When everyone owns the aging report, nobody does, and accounts slide while the counter staff assumes the office is calling and the office assumes the counter mentioned it. Call before you cut anyone off, and treat a credit hold as a conversation rather than an ambush; the contractor who learns about his hold from an embarrassed cashier at a full counter remembers it. If an account needs a payment plan, put the plan in writing with amounts and dates, and when a customer pays down a big old balance, say thank you like you mean it.

Waiving a first finance charge for a good customer is cheap goodwill, and a bookkeeper at a Minnesota lumber and building supply store told us they wanted exactly that flexibility: the ability to adjust or remove a finance charge for one specific customer without pulling that customer off the finance-charge program entirely. Handing an account to a collection agency is the last step, not the third, and for consumer debts it brings FDCPA-covered collectors into the picture, so exhaust the friendly options first.

Where the POS helps

Paper tickets and memory can run a house account program, but the right system does the remembering for you. The checklist to look for: credit limits enforced at the register, terms set per account, statements generated as a batch on a schedule, finance charges assessed by the system rather than by calculator, an aging report that is always current, and a way for customers to see their balance and pay online.

How Rundoo handles house accounts

Rundoo is the AI-first POS built for independent supply stores, and house accounts are built in. Each account carries its own pricing, whether that is a price tier or custom pricing for a specific customer, its own terms (net 30, 60, or 90, for example), and a credit limit the register enforces while your staff checks out a contractor. Each account has a statement day, statement runs generate statements for the accounts on schedule, and customers can be set to receive them by email or by mail. Statements can run open-item, listing the invoices still open as of the end date, which is the format your contractors will thank you for.

Finance charges are configurable per customer, with a rate and a compounding option, assessed on scheduled statement runs, monthly, or manually. Your staff can see which accounts carry finance charges and remove or void one before statements go out, which is how the goodwill waiver above gets done, and Dooey, the AI on every screen, flags an account creeping past terms before it becomes a write-off. The accounts receivable report shows past-due accounts by 30, 60, and 90+ days with total balance and sales history, and it exports to Excel for the bookkeeper who wants it in a spreadsheet.

On the customer side, the Customer app shows your account holders their balance, invoices, statements, and aging buckets, and lets them pay by card or ACH, pay selected invoices, pay finance charges, and set up autopay on their statements. One farm and hardware owner in Washington told us he ruled out other systems because they could not handle customer statements, which he called a deal-breaker, and he called customers seeing balances and setting up autopay on their phone a "game changer" for cash flow. Comparing the year before switching to Rundoo with the year after, stores saw a 25% reduction in accounts receivable, which is what happens when the statement goes out on time and the customer can pay it from the cab of a truck.