Automate Your Credit Limit Checking Processes

The automated factoring application enables fast decisions on purchase limits i.e. on the purchase of receivables from your factoring customers.

The automation of leasing applications enables fast decisions to be made on them.

Automated decision-making of credit limit applications, if desired in multi-stage approval processes.

A credit limit (also known as a credit line) generally describes a credit framework that a customer can, but does not have to, utilize in a business relationship. This maximum credit amount that is granted to a particular customer/debitor is orientated on the customer's creditworthiness. To put it simply: the better the customer's creditworthiness, the safer the business will probably be, and therefore the higher the limit can be set.

The checking and determination of the credit limit therefore always takes place on the basis of a comprehensive creditworthiness evaluation – not only at the start of a business relationship but repeatedly throughout its continuation. Another important factor here is whether and to what extent securing measures such as trade credit insurance come into play, providing scope for the allocation of a higher limit.

Companies that work with trade credit insurance sometimes decide to supply their customers only up to the insured limit, thereby relying on the estimation made by the insurance company.

At first sight, this may seem to simplify the checking of credit limits and make business more secure, but this method of operation also has disadvantages. One's own evaluation criteria are not considered when allocating limits and a possible increase in turnover is prevented by the limit fixed by the credit insurer.

If you want to utilize all the chances for turnover growth and do business independently of the credit insurance company, also beyond the insured limit, you need your own systematic credit risk management.

This performs the task of setting credit limits on the basis of comprehensive credit ratings, which ideally are complemented by information from financial statement analysis and payment records.

The more information is included in the creditworthiness checks, the more complicated they become. For an efficient procedure the use of a software solution such as CAM, which includes all the data automatically, processes it and aggregates it into an overall rating, is essential.

The determination of the credit limit from the calculated rating is regulated by the defined credit policy of the company. It is mandatory for all departments and aims to ensure transparency, e.g. in the Sales Department.

In the course of business relationships credit managers must have a constant overview of whether limits are being observed or exceeded. To do this, the amount of every new order must be compared with the unused remainder of the limit. It must also be clear what needs to be done if the limit is exceeded: should an individual check be performed? Should the order be stopped immediately? Who needs to do what?

Technical support takes care of automatic monitoring of credit lines and assists with the resulting processes. This reduces the workload in day-to-day business, frees resources for difficult decisions on individual cases and minimizes errors.