QuickBooks Tip: Setting Customer Credit Limits

It is helpful to your customers to extend credit to them, and doing so promotes trust and goodwill.  However, as a business owner you need to control your potential bad debt losses by setting credit limits for each customer.

Quickbooks can help you control your outstanding customer receivable balances by setting credit limits.  QuickBooks will warn you when you try to record a new invoice that would bring the customer’s outstanding balance above the credit limit.  Keep in mind that the warning does not prevent the invoice from being prepared, it only provides the warning.  To date QuickBooks does not give you the ability to put a credit hold on a customer, however I will offer some tips on that as well.

Set a customer credit limit by following these steps:

1. Click Customer Center.
2. Double –click the name of the customer for whom you want to set a credit limit.
3. On the Payment Info tab, enter the credit limit in the field provided.
4. Record the credit limit for this customer.

You should regularly run the accounts receivable (A/R) aging report to monitor your customers’ outstanding balances.

So what about a customer whom you want to place on a credit hold? Here are two easy ways to help prevent a posting of invoices or orders to that customer until he has paid off his outstanding balances:

1. Make the customer inactive (in order to post anything to the customer you need to make him active).
2. Modify the customer name to include CREDIT HOLD in the name.

Managing customer receivables is an important part of your business.  It’s important to keep on top of old outstanding receivables.  Communicating with your customers and discussing the issues is key to maintaining good customer relationships and healthy cash flow.