Credit Limit Worksheet
A credit limit is the maximum you are willing to be owed by one customer at any time — this worksheet helps you set it deliberately rather than by accident.
What's included
- Three methods for calculating a starting limit, side by side
- A worksheet to record the inputs and the decision
- How to factor in your own cash position
- When to review the limit up or down
6 min read
What a credit limit really caps
A credit limit caps the total a customer can owe you at once, across all unpaid invoices. It is not a measure of how much you like the customer — it is a measure of how much you can afford to lose if they fail, weighed against the trade the relationship brings in. Set it too low and you lose sales; too high and one insolvency takes a serious bite out of your working capital.
The worksheet below gives you three ways to land on a number and a place to record the reasoning.
The credit limit worksheet
- Customer / entity
- __________________ ABN: __________
- Method 1 — Expected trade
- Estimated monthly purchases: $______ × 1 to 2 months = $______
- Method 2 — Affordable loss
- Most you could comfortably write off from one customer: $______
- Method 3 — Reference
- Limits other suppliers extend (from references): $______
- Cash-position check
- Would this account be a large share of total debtors? [ ] Yes [ ] No — if yes, scale back.
- Proposed limit
- $______ (lowest sensible of the above for a new customer)
- Approved by
- __________ Date: ______ Review date: ______
How to use it
Complete a worksheet for each new account and keep it on file. For a new customer, start with the most conservative of the three figures and let a clean payment record earn increases. Before finalising, sense-check the late-payment cost of a slow balance at this limit with the Merion tools — if the answer makes you wince, the limit is too high for your circumstances.
Revisit the worksheet when a customer asks for more capacity or when payments start to slow. Pair it with your account review checklist for scheduled reviews.
This is general business information, not legal advice.
Tips
- Use the most conservative of the three methods for a brand-new customer.
- Scale a limit back if the account would be a large share of your total debtors.
- Let a clean payment history earn limit increases, not a sales request.
- Record who approved the limit and when it is due for review.
FAQ
Which method is best?
Use whichever fits the information you have, then take the lowest sensible figure for a new customer. Mature accounts can lean on trading history.
Should every customer have a limit?
Yes — every active credit customer needs a recorded limit, even a generous one, so exposure never grows by default.
How often should limits be reviewed?
Quarterly for your top accounts; at least annually for the rest, and immediately if payment behaviour deteriorates.
Templates are a head start — not legal advice
Customise to your business and have important documents reviewed. Need to recover a debt? We can help.