Xero now allows businesses to add a credit limit for its customers. The setting is located within the Financial Details sections of Contact Information. Once added Xero keeps track of the value of outstanding invoices against this customer.
This is not the same as how a credit limit would work in a more sophisticated solution. It is also unclear whether this setting can be fed back into CRM systems. This is where small businesses sales orders would commonly raise sales orders. A Sales Order solution should check the outstanding balance of invoices against the credit limit once connected. If exceeded it will halt the Sales Order pending payment.
Currently, Xero alerts the user if an invoice is raised that when combined with unpaid invoices exceeds the total credit limit. This visual alert only appears automatically for users using the new invoice interface. When using classic invoicing the user needs to access the hover over the contact name to display the same information.
When an invoice is created the user can see:
- Total overdue payments.
- Outstanding balance.
- Credit limit.
- Available credit.
This is very useful where businesses raise invoices before delivering goods or services, less so if after the fact. However if a user looks at the contact information page it now displays the credit limit and available credit. The figure is highlighted in red if it equals zero.
How could Xero develop Credit Limit?
This was a much requested feature by users. However Xero could take this system further.
- Ensuring that an approver sees the alert for classic invoicing as well as the new interface.
- If the credit limit is exceed block users from raising invoices against that contact.
- A report to display credit status of companies.
- Leveraging analytics to review current credit limits and suggest adjustments.
Xero also has an opportunity to either leverage a third party solution such as Dun and Bradstreet to propose new credit limits. Alternatively it could perhaps benchmark data across its ecosystem and suggest credit limits for companies.
This is useful feature addition to Xero. However, for many customers until their CRM is able to pick up the figure it will not necessarily stop them placing orders against a customer that has exceeded their credit limit. For example SalesIn and Onsight, two of the Sales Order processing apps on the Xero Marketplace do not appear to support credit limits. Once it is connected this could become a very useful feature in limiting the exposure of small businesses to companies that cannot to afford to pay their bills.