What is credit limit management?

Credit limit management is the process of setting, monitoring, and controlling how much credit a B2B customer can use when purchasing on credit. It helps businesses control financial exposure when customers are allowed to place orders without paying the full amount immediately.

Credit limit management can include:

• Setting credit limits: Assigning a maximum outstanding amount to each customer or company.
• Monitoring credit usage: Tracking unpaid invoices and current outstanding balances.
• Checking available credit: Determining whether a new order fits within the customer’s remaining limit.
• Order approval: Sending orders for review when they exceed the customer’s available credit.
• Adjusting limits: Increasing or decreasing limits based on payment history, contracts, or business requirements.
• Payment-term management: Supporting terms such as Net 30 or Net 60 where applicable.
• Alerts: Notifying customers or staff when credit limits are approaching or exceeded.

Example: A B2B customer has a ₹5 lakh credit limit and already has ₹3 lakh in unpaid invoices. If they place a new ₹2 lakh order, the system can check the available credit and determine whether the order can proceed.

Credit limit management helps businesses control outstanding receivables, enforce purchasing policies, and manage credit exposure. Credit decisions should be based on appropriate financial information and regularly reviewed.