How to Approve Customer Credit Limit and Payment Term Changes

Use this routine for increases, reductions and suspensions of an existing customer's credit limit, as well as longer or shorter payment terms. Include changes to how the due date is calculated, such as moving from invoice-based terms to a monthly statement arrangement. Record the old and proposed values separately.

Treat this as a customer master-data control. Start with the correct customer account, approve a specific change and check the saved record. For a new party, use the customer master onboarding checklist first. If several records appear to represent the same customer, resolve the account mapping before deciding how much credit to allow.

• ✓Customer account reference, legal or trading name, and any linked accounts included in the review.
• ✓Current credit limit and payment terms, followed by the exact proposed values.
• ✓Reason for the change and supporting evidence, such as an order requirement, collection record or revised commercial agreement.
• ✓Exposure summary, overdue invoice details, disputed amounts and pending orders, all checked at the same review point.
• ✓Whether the request is permanent or temporary, when it should take effect and which transactions it covers.
• ✓Requester, proposed approver, person making the update and person checking it.
• ✓For a temporary exception, the expiry trigger, restoration instructions and owner responsible for follow-up.

Keep the request and supporting records together under one reference. If the proposal changes during discussion, submit the revised values for approval. An approval for the original request should not be treated as permission for a different limit or term.

Prepare one exposure view before making the decision. For this routine, show open receivables, supplies already made but not yet invoiced, and orders that would use the proposed credit. Keep the components visible and avoid counting the same supply twice. State whether amounts include tax and use the same basis as the credit limit.

Do not treat a promised payment as money received or an expected credit note as an adjustment already posted. Use the receivables collection routine to follow overdue balances. Where a receipt is unidentified, follow the unidentified customer receipts allocation guide before relying on it to reduce the exposure under review.

Assign approval to someone other than the requester, with authority under your written credit policy. The approver should consider the exposure review, collection history, reason for the request and effect on cash available for other payments. Choose approval levels for your business; do not borrow another business's limits without assessing your own position.

In a small team, the owner may approve a request prepared by sales or accounts. Keep the requester's recommendation separate from the owner's decision. Where the owner initiates the change, arrange a second authorised review rather than recording the owner's request as independent approval.

• Approve, reject or return the request with a clear reason.
• Specify the approved limit, payment terms, scope and effective point.
• State whether overdue invoices require collection action or an order hold.
• Record any conditions and who will confirm they have been met.
• Communicate revised terms through your agreed customer process; an internal approval does not establish customer acceptance.

The person updating the customer master should work from the recorded approval. Check the customer reference, enter only the authorised values and retain evidence of the previous settings. Give edit access only to people responsible for maintaining these records.

1. Compare the approved request with the correct customer account before editing.
2. Save the approved limit, terms and effective settings.
3. Have a second person reopen the saved record and compare it with the approval.
4. Check the due date calculation and credit-control behaviour on an appropriate draft or test transaction, where available.
5. Confirm how existing invoices and open orders are affected before releasing further supply.
6. Record who made the change, who checked it and any mismatch corrected.

Do not assume a master-data change applies only to future invoices. Check the behaviour of your accounting system. Keep any correction to an existing invoice's due date separately authorised and traceable, rather than allowing a general term change to rewrite collection expectations unnoticed.

Approve an exception with a defined ceiling, permitted transactions and an expiry trigger. Name the person responsible for reviewing it and restoring the normal settings. If automatic expiry is unavailable, create a tracked action and require evidence that the restoration was checked.

Illustrative example only: a customer has a limit of Rs 2,00,000 and open receivables of Rs 1,60,000. A proposed order would add Rs 70,000, taking the reviewed exposure to Rs 2,30,000, assuming no other exposure or verified credits. The request is therefore for Rs 30,000 above the current limit. Approval might cover that order alone, subject to a documented collection condition, rather than permanently raising the customer's limit.

Keep a chronological record of the old and new values, request reason, exposure reviewed, approval, effective point, update and verification. Include customer communication, temporary expiry and restoration evidence. Preserve rejected requests and withdrawn proposals so a later reviewer can distinguish a decision from a change actually made.

Review recent changes alongside overdue collections and expired exceptions. Follow up where approved conditions remain open, a temporary increase keeps being extended or the saved settings differ from the approval. Retain the history under your business's record-retention policy.

• Increasing a limit solely to remove an order block, without reviewing why the block arose.
• Ignoring other customer records that belong in the same exposure review.
• Hiding overdue invoices by changing their due dates without separate approval.
• Treating an informal message as authority when it does not identify the exact values and scope.
• Calling an exception temporary without assigning expiry and restoration work.
• Accepting a screenshot of entered values without checking the saved customer record.

This routine does not replace new-customer onboarding, invoice dispute resolution or approval to write off an unpaid balance. Those decisions need their own supporting records. Keep them connected to the customer history without treating a credit-limit change as permission for all three.