Tips & Tricks #1: Reduce customer debts by setting credit limits in Zoho Books

Tips & Tricks #1: Reduce customer debts by setting credit limits in Zoho Books

Hello,

Selling goods on credit is a common business practice. Some businesses choose cash sales while some choose both cash and credit sales. Though cash sales might mean immediate inflow of cash, credit sales can be helpful for retaining customers and their goodwill. As important as providing credit sales can be, it is necessary to have control over overdue balances. Here's where the credit limit feature in Zoho Books comes into play.



Why set credit limits?


Though selling goods on credit can help in winning customers, here's why it is necessary to have a stricter credit policy in your organization:

  • Selling goods on credit all the time might have an adverse effect on your cash inflow. Excess outflow of goods with huge outstanding receivables might be unfavourable for any business.
  • Let's say there are multiple users in an organization. The credit worthiness of a customer might not be known to a new billing staff. The staff might have created a transaction for a huge amount only to figure out that the customer has a record for making late payments or defaulting on them.


How do I set this up?


You will first have to enable credit limits from your settings to set limits for your customers. Here's how:
  • Go to Settings > Preferences > Contacts > General .
  • Mark the box Enable Credit Limit under Customer Credit Limit to enable it.
  • Choose your workflow preference: Restrict creating/updating invoices or Warning users while creating invoices.
  • Click Save.
Note : Only the users who have the permission to enable this will be able to set it up. View this under More Permissions under Customer in the Users and Roles section.



How do I set the credit limit for a customer?


Once you have enabled this, you can set a credit limit for your customers based on their previous transactions, their existing outstanding balances, their payment records, or based on how much you know and trust them on a personal level. To set limits:

  • Go to the Contacts module and select the customer for whom you wish to set a limit.
  • In the overview page, go to the Other Details section.
  • Edit the Credit Limit field and enter the amount.
  • Click the Tick button.
Note : You can also set the limit while creating a new customer. For this, you would need to enter the amount in Credit Limit field in the Other Details section.



So how does this work in Zoho Books?


When you enabled credit limits, you would've chosen your credit limit preference. Based on this here's what happens:

1.Restricting creating/updating invoices
The user cannot create or update the amount in an existing invoice if the outstanding balance and the invoice value exceed the credit limit.
2.Warning the users during invoice creation
The user is prompted about the invoice value exceeding the credit limit set for the customer, and can then reconsider how to proceed with the transaction.

In case the users have permission to configure credit limits, they will be able to update the credit limit for the customer when the credit limit is about to to exceed.

Do try this out, and if you have any feedback about this tip, or ideas for new ones, you can email us at  support@zohobooks.com .


Watch this space, more tricks coming your way!


Cheers,
Aashika
The Zoho Books Team


We're always looking for ways to make Zoho Books a product more user-friendly and easy to understand. With this in mind, we've started off our new series of Tips & Tricks to help you make the most out of Zoho Books.







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