Credit limits exist but nobody follows them
Check customers' credit limits against bill-wise outstanding and open orders. Use what you find to change the way this work is handled this week.
This is one cause behind related problems such as Customers dispute invoices to delay payment. New orders are dispatched to customers already past their limit. The checks below concentrate on this cause rather than repeating the full symptom diagnosis. At the customer ledger and bill-wise ageing report, the accounts or collection coordinator can usually see the earliest warning. New orders are dispatched to customers already past their limit. Check it before staff spend time correcting work that has already moved on.
What it looks like
- The accounts or collection coordinator has to search the customer ledger and bill-wise ageing report before answering a routine question.
- New orders are dispatched to customers already past their limit.
- Staff cannot locate the invoice, bank receipt, customer statement and agreed promise for the latest case.
- People spot the gap after a customer balance remains unresolved while cash planning assumes payment.
- The open case has no documented owner, due date or proof of closure.
Why it happens
The specific failure is left unchecked. New orders are dispatched to customers already past their limit. If there is no recorded owner for that condition, the effect travels to the next team.
The work and its evidence move separately. A customer balance is visible in accounts but the last promise, dispute and contact may sit with sales.
A later hand-off exposes the gap. Forecast receipts are sometimes treated as certain even while bank allocation and customer confirmation remain outstanding.
The less obvious cause: A control may exist on paper but still fail in practice. Test whether someone actually performs this check: find dispatches approved while the customer exceeded the limit.
Find the first failed hand-off before changing staff targets. A completed register alone cannot prove that physical work happened.
What to check first
- Check customers' credit limits against bill-wise outstanding and open orders. Compare dates, quantities and references. Mark an unconfirmed difference as unverified. Finish the first pass in under 30 minutes and name the missing source if needed.
- Find dispatches approved while the customer exceeded the limit. Record the affected item or party and the person who can verify the detail. Finish the first pass in under 30 minutes and name the missing source if needed.
- Review whether exceptions had named approval and a repayment plan. Mark each exception open, waiting for evidence or resolved, with a named next owner. Finish the first pass in under 30 minutes and name the missing source if needed.
How to fix it
- Start with one live case. Check customers' credit limits against bill-wise outstanding and open orders. Keep the source reference before changing the record.
- Make the control explicit. Run a credit-limit check before order release. Put the rule in the register or sheet that staff already use.
- Set a second guardrail. Require recorded authority for increases or exceptions. Separate cash received from money only promised. Confirm the correct invoice and dispute before increasing pressure on a customer.
- Assign the next decision. The accounts or collection coordinator records the action and its due date. A separately authorised person signs off changes affecting money, safety or customer terms.
- Review the open list. Start with items affecting today or tomorrow. Keep third-party commitments separate from completed actions.
- Check whether the rule holds. For four weeks, count overdue undisputed amount and promises missed. Reopen repeat cases and identify where the control failed.
Copy this bill-wise collections and promise register into a register or sheet:
| Reference / item | What went wrong | Evidence checked | Action owner | Promised date | Status / decision |
|---|---|---|---|---|---|
| P086 (example) | credit limits ignored | Check customers' credit limits against bill-wise outstanding and | Accounts or collection coordinator | Set at review | Open |
Retain the source reference and limit access to authorised staff.
A worked example
Illustrative example only. A dealer with ₹4 lakh limit has ₹4,80,000 outstanding and a new ₹90,000 order. Start by locating the source that would verify these amounts or quantities. The accounts or collection coordinator records the exact exception, gives it an owner and checks the next relevant event. This example shows how to structure the decision. It does not claim that a business achieved a saving or avoided a loss.
How you know it is fixed
- Completeness: Count overdue undisputed amount and promises missed at the same time every week. Record the count and the oldest item, rather than just saying things are better.
- Timeliness: Check whether the assigned person took the next action before the agreed cut-off. Keep missed dates visible instead of replacing them silently.
- Proof of closure: Sample three closed cases and locate the invoice, bank receipt, customer statement and agreed promise. A tick without supporting evidence is still an open control gap.
When it is more serious
Concentrated defaults threaten payroll or supplier payments. Hold irreversible decisions until the material facts are verified. For contracts, tax, wages or legal rights, retain source documents and consult a qualified adviser. Repeated exceptions after four reviews may require changing the control.
This works if someone does it every day. In most businesses, that someone is you.
Questions people ask
What should we check before taking action?
Check customers' credit limits against bill-wise outstanding and open orders. Keep its date and reference. Then compare it with the invoice, bank receipt, customer statement and agreed promise; if they disagree, record the difference before changing either one.
Who should own the next action?
The accounts or collection coordinator should own the open item. The person authorised to change money, a technical standard or a customer commitment must still approve that decision.
Can we run this control without new software?
No. Start with a shared sheet or register containing the reference, owner, promised date, status and evidence. Once those fields are reliable, decide whether a system connection is worth setting up.
When is the issue serious enough to escalate?
Concentrated defaults threaten payroll or supplier payments. Keep supporting records and get specialist help where relevant.