Credit management
Definition
Credit management is monitoring the credit risk a company runs with business customers who buy on invoice: how much open credit a customer still has, and whether new orders fit within it. Much of B2B sales happens on account, not with direct payment.
Buying on account has a limit
A business customer rarely pays immediately when placing an order. Instead, they get a credit limit: a maximum amount of outstanding invoices they're allowed to carry.
What happens when it's exceeded
As soon as a customer nears or exceeds their credit limit, a system can automatically block new orders or flag them for manual review, instead of an employee finding out after the fact.
Practical example
A customer with a credit limit of 10,000 euros and 9,500 euros in outstanding invoices tries to place an order for 800 euros. The system automatically warns before the order is confirmed.
Related terms
Payment terms (Net terms) · Approval workflow · Order-to-cash
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