Credit Limit
Credit Limit is the maximum amount of credit you are willing to offer to a Customer.
In simple terms, Credit Limit defines how much value of goods or services a customer can receive without making upfront payment. It helps businesses control financial risk and ensure healthy cash flow.
When a Sales Order or Sales Invoice is submitted, ERPNext automatically checks whether the customer has exceeded their allowed credit limit.
1. Understanding Credit Limit
A Credit Limit represents the maximum outstanding balance a customer is allowed to maintain.
It can be defined at multiple levels such as:
– Customer
– Customer Group
– Company
The system evaluates these levels in a specific order to determine the final applicable limit.
Credit Limit helps prevent over-selling to customers who have unpaid dues.
2. Order of Precedence
ERPNext follows this priority when checking credit limits:
1. Customer Level Credit Limit
2. Customer Group Level Credit Limit
3. Company Level Credit Limit
This ensures the most specific rule is applied first.
3. How to Set Credit Limit
To configure credit limit for a customer:
- Go to Selling > Sales > Customer.
- Open the desired Customer record.
- Scroll to Credit Limit and Payment Terms section.
- Enter the Credit Limit value.
- Save the document.
If the value is set to 0, it means there is no credit restriction applied.
4. Key Features
4.1 Credit Controller Role
A Credit Controller is a user role that can override credit limit restrictions.
This is useful in situations where exceptions are needed for important customers.
To configure:
– Go to Accounting > Settings > Accounts Settings
– Assign a role under Credit Controller
4.2 Bypass Credit Limit at Sales Order
ERPNext allows bypassing credit checks at the Sales Order stage for specific customers.
When enabled:
– Credit check is done only at Sales Invoice level
– Sales Orders can still be created even if limit is exceeded
This is useful for flexible credit policies.
4.3 Credit Limit at Customer Group Level
Instead of setting limits individually, you can define a shared limit for a group of customers.
This is helpful when customers belong to similar risk categories.
4.4 Credit Limit at Company Level
A global credit limit can be set for all customers under a company.
This acts as a safety fallback when no specific limits are defined at customer or group level.
5. Business Impact
Credit Limit management helps businesses:
– Reduce bad debts
– Control outstanding exposure
– Improve financial planning
– Enforce credit policies automatically
Credit Limit in ERPNext defines the maximum credit allowed for a customer. It can be set at Customer, Customer Group, or Company level, with Customer-level settings taking highest priority. The system blocks or warns users when limits are exceeded during Sales Order or Sales Invoice submission. A Credit Controller role can override restrictions, and bypass options allow flexibility in credit handling.
Credit Limit checks are a financial safeguard, not just a validation rule. Proper configuration ensures smooth sales operations while minimizing the risk of unpaid invoices.
