This tool calculates the outstanding need
with your buyer, based on the volume of business coming and payment terms granted. It compares then the result (theoretical credit limit
) with its financial capabilities to determine the acceptable credit limit
It is based by default on two financial criteria:
- The Tangible Net Worth (TNW, equity minus intangible assets)
- The Turnover
And calculate the acceptable credit limit
by applying the corresponding percentage on these two criteria (the most restrictive result applies).
These criteria can be modified by clicking on . Customize scoring criteria
The objective is to define a credit limit
that is consistent with the financial capabilities
of the buyer.
is insufficient in relation to future sales, it is necessary to negotiate shorter payment terms and / or obtain third-party payment guarantees (bank, insurance ...) in order to secure the commitments.
If the acceptable
According to the result of the credit notation
, the acceptable credit limit
will be at most equal to the percentage of the TNW or the turnover defined.
→ Learn more: credit notation? What is the
Example of calculation using the following assumptions:
- The Sales forecast (outstanding need) is 250 000 euros. the calculated Theorical credit limit (credit limit need) is 50 000 euros
- The TNW of the customer is 80 000 euros
- Its yearly turnover is 700 000 euros
- Credit notation result is B
The result is maximum: 35% x 80 000 = 28 000 euros or
5% x 700 000 = 35 000 euros.
The acceptable credit limit is then 28 000 euros
, as the most restrictive criteria applies.
You can save the result of the calculation to keep the history.
, it is necessary to update the customer file or the information in your ERP.
→ Learn more: credit limit? How to manage
To update the