Credit size

If you work with credit for your customers, there are two essential concepts you need to know: credit periods and credit sizes.

In this section, we focus on credit sizes - and how you as a company and creditor actively work with this.

When we talk about credit size, we often also talk about credit max or credit limit - it basically means the same thing: the amount a debtor can trade on credit for.

Why is credit size important?

Many companies provide credit, but not all of them actively work with credit sizes - and that's a shame.

Because all credit, whether it's debt or an invoice with a due date in the future, is always associated with a certain risk. A risk that includes the possibility that a debtor or borrower will not pay their installments on time - or not pay them at all if, for example, a debtor goes bankrupt, dies or similar.

Therefore, it is important to actively work with credit sizes to minimize your risk of loss.

What are the credit size requirements?

Basically, it is the company (creditor) itself that determines the credit size - and thus how much credit the company wants to give.

In other words, the credit size can be anything from a cash payment (0 kroner in credit size) to unlimited amounts.

Credit size as a sales and competitive parameter

Many companies are reluctant to give too much credit - and with good reason.

Because credit has an inherent risk that the debtor will not pay its outstanding debt to the creditor - and the creditor will experience losses.

But many industries use credit sizes as a sales and competitive parameter. For example, in the food industry, many restaurants and cafés can buy on credit for, say, 30 days - giving them the opportunity to sell the purchased ingredients and receive payment for them before they have to be settled with the supplier.

In other words, in these industries, credit and the amount of credit is an important parameter for the customer - and thus a sales and competitive parameter for the company.

Determining credit size

Determining how much credit a customer should have can be a difficult discipline - but is nevertheless an essential part of active credit management.

Because no two customers are the same, and neither are their credit needs.

The credit should be determined based on factors such as external accounts, any previously known payment history and whether the customer is registered as a bad payer in a debt register.

For example, new customers may have a smaller credit size, while old customers with a known good payment history can build up a larger credit size.

There are many possibilities - the important thing is that you actively manage your customers' credit size - and if necessary change it if their circumstances change.

Get help determining your credit sizes

Hos Qatchr har vi specialiseret os i at udvikle en online platform, der leverer kreditoplysninger, som kan indgå i din kreditvurdering af virksomheder og privatpersoner.

Our online platform makes it possible to credit assess customers, both individually and continuously, and thus have an active tool in your credit policy.

Our tool provides recommendations for credit sizes and credit tenure, so the decision doesn't have to be yours alone.

Our tool can't avoid bad payers for you - but we can help you minimize them.