Sage Offers Guidance on Setting Customer Credit Limits

Century Sage, a business software provider, has released guidance for companies on setting customer credit limits. The advice highlights the importance of credit limits in managing a company's cash flow and mitigating credit risk, noting that exceeding these limits can automatically place orders on hold for review.

The guidance outlines several methods for determining credit limits. These include using a percentage of a customer's net worth or working capital, averaging monthly sales figures, and considering trade references or direct customer requests. It also stresses the need to monitor customer payment behavior.

"There is no perfect way to set credit limits," the publication states. The objective is to find a balance between commercial needs and the company's capacity to absorb bad debt losses. It underscores the necessity of regularly reviewing and adjusting credit limits, especially when a customer's payment behavior deteriorates.

Century Sage also suggests leveraging automated credit and collections solutions to enhance credit risk monitoring. The company points to features like custom credit scoring models, dashboard reporting, automated customer communications, and smart activity management as tools to help businesses better track customer creditworthiness and anticipate potential issues.