DEFINITION
A credit limit is the maximum amount a customer may owe you at any time in invoices it has not paid yet. A customer with a €50,000 limit and €42,000 outstanding can take €8,000 more on credit; beyond that, you ask for payment first.
Limits are set from the customer's payment history, its size and accounts, and often from what a trade credit insurer will cover. They are reviewed as the relationship develops: a new partner may start at zero, paying in advance, and earn credit over time.
The useful figure is not the limit itself but the available credit: the limit minus everything outstanding, including orders confirmed but not yet invoiced.
HOW KOLIBRA HELPS
Kolibra keeps a credit limit on each customer and shows, on its card, the credit used and still available from its real open amounts.