About Credit Limits
Credit limits help you track and manage outstanding accounts receivable. Credit limits allow you to place a ceiling on a customer's credit amount. There are two kinds of credit limits: fixed and floating.
In the DDMS system, you can set up a fixed credit limit for customers, and any departments they may have, while also preventing payments and adjustments from affecting the credit limit amount. The total credit limit available to the customer and the department remains the same until you manually reset it.
Suppose you have a government contract that allows the customer's department to spend up to $3000 each month. As you place orders, the credit limit amount is reduced. Even if you post payments or adjustments during the month to the customer's master account, the total credit limit available to the customer's department account is not increased. To change it, you must reset the customer's department account in the Customer Credit Tab with the new amount.
To use floating credit, you must set up one parameter in the (LA2) screen, as well as set up the customer's account in the Customer Credit Tab.
You specify how this Credit Limit box is used through the G/L Location and Floating Credit fields in the (LA2) A/R Parameters screen.
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