A credit limit starts with the customer’s capacity to carry risk
Financial structure, ability to pay and payment behaviour, indebtedness, trading volume, management quality, the quality of growth and sector are assessed together.
EXECUTIVE SUMMARY
Executive Summary
A credit limit is not the numerical answer to a sales request; it is a management decision where customer capacity meets the company’s risk policy. ALMERA’s core question is not “How much can we sell?” but “How much risk can we soundly carry with this customer?”
Key Management Areas
6 topicsFinancial and qualitative criteria come together in one allocation decision
ALMERA uses a hybrid approach that does not rely on a single ratio or on turnover. This assessment becomes the ALMERA Credit Allocation Limit: the total credit risk considered appropriate to carry for the customer.
The limit is based on potential total risk, not the current balance
Alongside existing receivables, orders, uninvoiced shipments, pending transactions and seasonal peaks are also factored into the potential peak-risk calculation.
A credit limit is a living decision
The limit is reassessed as the customer’s financial strength, payment behaviour, trading volume and market conditions change. Inflation or nominal sales growth alone is not seen as grounds for an automatic limit increase.
Exceeding a limit is a temporary exception, not a second limit
Seasonality or a temporary commercial need may require an overrun. But the amount, reason, duration, authority and conditions for returning within the limit must be defined. If the need is permanent, the underlying credit capacity is reassessed.
“An overrun is not a way of changing the limit.”
The limit decision is linked to the portfolio and collateral structure
As well as the customer’s capacity, we assess whether the company wants to carry risk of this size within its total portfolio. Collateral supports the credit decision through the separate management system covered in 07.
WITH ALMERA
What changes when ALMERA comes in?
01Existing limit criteria are compared with the customer’s real risk capacity.- 02The ALMERA Credit Allocation Criteria → Credit Allocation Limit → Authority Levels → Limit Usage → Overrun Discipline → Periodic Reassessment chain is set up.
- 03Credit limits are turned into a measurable, dynamic Customer Credit Limit Management System.
THE ALMERA VIEW
A credit limit is not a wall in front of sales; it is the safe operating space for healthy trade.
The right limit system stops the customer’s financing burden from quietly moving onto the company’s balance sheet.