Decide on a credit request and record the decision
Steps 4 and 5 of deciding on credit: make the call and leave it where others will find it. You decide between releasing, holding, part-shipping and refusing, name what each choice costs, and record the decision on the customer. A last section says who should hold which permission, because BigLedger has no approval step on any sales document. It follows Steps 2 and 3, where you counted the full exposure. The common mistakes for the whole decision are on the front page. The running example is an IT dealer in Penang with a RM 150,000 limit on Net 30 at GadgetSphere Distribution (GSD), who also buys on account from the retail company (GS) and has just ordered RM 44,520 of laptops; Meet GadgetSphere sets out what they owe.
- Step 4: decide, and name what each choice costs.
- Step 5: record the decision where the next person will see it.
Step 4: Decide, and name what each choice costs
The outcome: a decision you can defend, with its consequence stated.
This is the job, and it is the same job it was before any software. There are four answers:
| Decision | What happens commercially | How you make it happen in BigLedger |
|---|---|---|
| Release | You take on the extra risk to keep the customer and the sale. Right when the customer pays reliably and late money is a timing issue, not a solvency one | The order is finalised. If the credit check refuses it, somebody who can change the customer’s credit limit raises it, and a date is written down for putting it back (Step 5) |
| Hold | The goods wait until money arrives. The customer is told why, and when it will ship. You risk losing the order to a competitor | Leave the order in draft. A draft order posts nothing and is not a promise. Whoever holds the FINAL permission on sales orders is the person who releases it, so make sure that is not the salesperson who wants it shipped |
| Part-ship | You ship what the current headroom covers, and the rest waits for a payment. Often the best answer for a good customer who is temporarily stretched | Finalise the order, then invoice only part of it, as in Partial Delivery Workflow. The rest stays open on the order |
| Refuse | You protect the receivable and may lose the customer. Right when the money you already have at risk is doubtful | Do not raise the order. If the refusal must also stop the rest of the business selling to them, that is the blacklist (Stopping Supply to a Customer) |
For the dealer, a sensible call is hold, with an offer to part-ship. They are over on invoiced-plus-ordered alone, and RM 38,000 of the invoiced money is fifteen days late. Tell them that five laptops (RM 22,260) ship the day the RM 38,000 arrives, and the other five ship when the next invoice is paid.
Two questions to ask before any release:
- Is the late money disputed, or just late? A disputed invoice is a customer who does not think they owe it. Releasing more stock does not help you collect it. See Chasing Overdue Accounts.
- Who else in the group is selling to them this week? Your decision at GSD does nothing to stop GS’s counter selling to the same customer. If the risk is group-wide, so is the conversation.
Step 5: Record the decision where the next person will see it
The outcome: the order desk, the counter and your successor all know what was decided without asking you.
Master Data > Customer Maintenance > (the customer) > Main > Alert Message
The customer record has an Alert Message of up to 255 characters. It appears in a banner at the top of the account panel whenever somebody picks this customer on a new sales order or sales invoice. Use it for exactly this:
Credit hold 24 Sep: RM 38,000 overdue. Part-ship only after payment. Refer to credit control.
Then write the same reason in the Remarks on the held order, so that the order carries the reason.
If you released an order by raising the limit, write the date you will put it back in the alert message too. Nothing in BigLedger will remind you. A temporary limit that nobody lowers becomes the new limit. Put the reminder in your own calendar for the day after the invoice is due.
Who does what
Credit control works when the person who wants the sale is not the person who approves the risk. BigLedger has no approval step on any sales document, so this separation comes from who holds which permission:
- The salesperson raises the order and knows about the promises (layer 3). They should not hold FINAL on sales orders for credit customers, or the right to edit a customer’s credit limit.
- The credit controller (you) works out the exposure, makes the decision, holds the right to change credit limits and the two status dropdowns in Customer Maintenance, and writes the alert message.
- The finance manager approves any release above an amount you agree in advance (for GadgetSphere, anything that takes a customer more than 20% over), and reviews the list of temporary limit increases once a month.
Anyone who can edit a customer in Customer Maintenance can change its limit and its status. There is no separate permission for the credit fields. If you want those fields to be credit control’s alone, limit who can edit customers. Your administrator does it once, and you check it every quarter: you know it holds when the list of users who can edit customers in Customer Maintenance’s permission screens names only credit control and the people who set customers up.
When you are done, run the whole decision’s success check.
Related documentation
- Deciding on Credit: the whole decision, with its success check and the common mistakes.
- Credit Limits and Terms: setting the limits themselves.