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Credit Limit

  • 104views
  • February 7, 2024

Credit Limit

The Credit Limit represents the maximum amount of credit extended to a customer.

It denotes the highest sum of credit that a financial institution or lender agrees to provide to a debtor for a specific line of credit. From the customer’s viewpoint, it’s the maximum value of goods or services they can acquire without upfront payment.

You can establish the credit limit at different levels: individual customers, customer groups, or the company level. Upon submission of a sales order or invoice, the system verifies against the credit limit.

The precedence for Credit Limit verification follows this order:

  1. Credit limit set for the individual customer.
  2. Credit limit set for the customer group.
  3. Credit limit set for the company.

1. How to Set Credit Limit

  1. Go to: Selling > Sales > Customer > Customer.
  2. Under Credit Limit and Payment Terms section, set the Credit Limit.
  3. If you leave the Credit Limit as the default, i.e., 0, it has no effect.
  4. Save.

2. Features

2.1 Credit Controller

You can enable users with a designated role to bypass the Credit Limit validation. This allows them to submit a Sales Order or Sales Invoice even if a Customer’s Credit Limit has been fully utilized.

To set the Credit Controller role:

  1. Go to: Accounting > Settings > Accounts Settings
  2. Set the role in Credit Controller field.

2.2 Bypass Credit Limit Check for Sales Order

For particular customers, you can configure the credit limit to be verified against the total outstanding amount of sales invoices rather than considering sales orders. This can be done by selecting the “Bypass credit limit check at Sales Order” option in the “Credit Limit and Payment Terms” section of the customer settings.

2.3 Credit Limit for Customer Groups

To establish a Credit Limit at the Customer Group level:

  1. Navigate to Selling > Customers > Customer Group.
  2. Access the Customer Group and define the Credit Limit accordingly.

2.4 Credit Limit for Company

On setting Credit Limit at the Company level, all the Customers will have this Credit Limit applied globally.

To set Credit Limit at Company level:

  1. Go to Accounting > Masters and Accounts > Company.
  2. Open the Company and set the Credit Limit.
  1. Payment Entry
  2. Customer