Credit limit toolKey indicator to control the financial risk of your business, the credit limit sets a maximum amount of outstanding receivables that you agree to grant to each of your customers.

It has a warning role if the outstanding amount reaches or exceeds the limit set, which must lead to action to reduce this outstanding amount: reduction of the payment term, obtaining downpayments or additional guarantees (credit insurance, bank guarantees, ...).

To be really used in the company and to make it understood by the sales managers, it is imperative that it be defined in a coherent way.
To do so, it must take into account both the need for outstandings induced by the volume of business to come with the customer, as well as its financial situation (analysis of the balance sheet and the income statement).

Without defined credit limits, it is possible to let a customer's outstanding amount increase disproportionately with its ability to pay you. In this case, you risk unpaid over a high amount, which can be dramatic for your business..
Without defined credit limits, it is possible to let a customer's outstanding amount increase disproportionately with its ability to pay you. In this case, you risk unpaid over a high amount, which can be dramatic for your business.
See our credit limit tutorial as well as the online calculation tool that allows you to define a consistent amount based on the business need and financial criteria.
Date: 11-13-2018 - Author: Bertrand Mazuir
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