Credit Limit Management in iVendNext: Best Practices

Credit Limit Management in iVendNext: Best Practices

Overview

This article outlines the best practices for managing credit limits in iVendNext.



1. Introduction to Credit Limits

A Credit Limit is the maximum amount of credit that a business is willing to extend to a customer. In iVendNext, credit limits are checked whenever a Sales Order or Sales Invoice is submitted. By setting appropriate credit limits, businesses can control exposure to financial risk, ensure timely payments, and optimize credit policies.



2. Setting Credit Limits in iVendNext

2.1 Setting Credit Limits at the Customer Level

The most granular level for setting credit limits is at the Customer level. Here’s how to do it:


  1. Navigate to Customer Master: Go to Selling > Sales > Customer > Customer.


  1. Select the Customer: Choose the customer for whom you want to set the credit limit.


  1. Set the Credit Limit: Under the Credit Limit and Payment Terms section, enter the desired credit limit.


  1. Save: Click "Save" to apply the credit limit.



2.2 Setting Credit Limits at the Customer Group Level

If you have multiple customers who share similar credit profiles, you can set a credit limit at the Customer Group level:


  1. Navigate to Customer Group: Go to Selling > Customers > Customer Group.


  1. Select the Customer Group: Choose the customer group for which you want to set the credit limit.


  1. Set the Credit Limit: Enter the desired credit limit for the group.


  1. Save: Click "Save" to apply the credit limit.



2.3 Setting Credit Limits at the Company Level

For a global credit limit that applies to all customers, you can set a credit limit at the Company level:


  1. Navigate to Company Master: Go to Accounting > Masters and Accounts > Company.


  1. Select the Company: Choose the company for which you want to set the credit limit.


  1. Set the Credit Limit: Enter the desired credit limit.


  1. Save: Click "Save" to apply the credit limit.




3. Key Features of Credit Limit Management

3.1 Credit Controller Role

iVendNext allows you to assign a Credit Controller role to specific users. These users can override the credit limit validation and submit Sales Orders or Sales Invoices even when a customer’s credit limit is fully utilized.


  • How to Set the Credit Controller Role:

    1. Go to Accounting > Settings > Accounts Settings.

    2. Set the role in the Credit Controller field.



3.2 Bypassing Credit Limit Checks for Sales Orders

For specific customers, you can bypass the credit limit check at the Sales Order level. This means the credit limit will only be checked against the cumulative amount of outstanding Sales Invoices, not Sales Orders.


  • How to Bypass Credit Limit Checks:

  1. Open the Customer Master.

  2. Go to the Accounting Tab.

  3. Under the Credit Limit and Payment Terms section, tick the "Bypass credit limit check at Sales Order" checkbox.



3.3 Credit Limit Precedence

When a Sales Order or Sales Invoice is submitted, iVendNext checks the credit limit in the following order of precedence:


  1. Customer Level: If a credit limit is set at the customer level, it takes precedence.

  2. Customer Group Level: If no credit limit is set at the customer level, the system checks the customer group level.

  3. Company Level: If no credit limit is set at the customer or customer group level, the system applies the company-level credit limit.



4. Best Practices for Credit Limit Management

4.1 Regularly Review and Update Credit Limits

  • Monitor Customer Payment Behavior: Regularly review customer payment histories and adjust credit limits accordingly. For example, if a customer consistently pays on time, you may consider increasing their credit limit.

  • Adjust for Seasonal Variations: Some businesses experience seasonal fluctuations in sales. Adjust credit limits to accommodate these variations without overexposing your business to risk.


4.2 Use Credit Limits to Manage Risk

  • Set Conservative Limits for New Customers: For new customers, start with a conservative credit limit and gradually increase it as they establish a reliable payment history.

  • Implement Credit Holds: If a customer exceeds their credit limit, place a hold on their account until the outstanding balance is paid.


4.3 Leverage the Credit Controller Role

  • Assign the Role to Trusted Users: Only assign the Credit Controller role to users who understand the financial implications of overriding credit limits.

  • Monitor Overrides: Regularly review instances where the credit limit was overridden to ensure that they were justified.


4.4 Communicate Credit Policies Clearly

  • Inform Customers of Credit Limits: Clearly communicate credit limits and payment terms to customers to avoid misunderstandings.

  • Provide Early Warnings: Notify customers when they are approaching their credit limit to give them an opportunity to make a payment.


4.5 Automate Credit Limit Checks

  • Enable Automatic Checks: Ensure that credit limit checks are automatically performed when Sales Orders or Sales Invoices are submitted.

  • Use Alerts: Set up alerts to notify relevant users when a customer is approaching or has exceeded their credit limit.



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