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Credit Lines Complete Guide
Credit Lines Complete Guide

This is a complete guide to setting up and managing Credit Lines.

Hunter Kelly avatar
Written by Hunter Kelly
Updated over a week ago

Introduction to Credit lines

Credit Lines are designed as a form of payment that allows certain customers to place an order and pay later at their convenience.

These customers are defined by their purchasing demographic. An individual customer that is purchasing for their own home should never be granted a credit line. Financing is recommended if payment up-front is not acceptable. However, credit lines can still be set up for an individual. This topic will be covered further below.

Company(builder) customers are often given a credit line that matches their purchasing needs.

Credit Lines & Commission

This feature allows employees to do irreparable harm to the balance sheet of a business if used without proper discretion. Only certain employees should be permitted to work with credit line customers. Only certain employees will be able to set up a credit line. Credit line customers should be directed through a dedicated sales representative.

ANY employee will be able to use a credit line for payments if that customer has already been permitted a line of credit.

Credit lines under the “paid in full” commission structure allow for an employee to be paid before the work has been completed. This payment structure demands that a salaried employee manages the credit line orders.

Credit lines under the “by delivery” commission structure also allow for the same occurrence, but less frequently. This only comes into play with customers that do not pay for more than 30 days after delivery. Then a salaried employee becomes a requirement again.

Companies with a well-managed balance sheet and accounts receivables will find the above event less of an issue and this will mitigate the need for a salaried employee. Companies often underestimate the state of their account receivables due to poor accounting of goodwill. This topic will be covered further below.

Credit lines & Goodwill

Many software platforms for appliance retailers allow orders to be created without payment. In every single order must have some form of payment to proceed to the next steps.

When a customer has experienced damages and is owed either product or a credit the company must do its best to make the customer happy. Often the company will cover these costs for the customer to maintain a good relationship and encourage future purchases. This is called goodwill to the accountants. Many companies severely underestimate how much goodwill has been used to solve customer issues. Most software systems do a terrible job of tracking these instances all the way back to the balance sheet.

Credit lines will be used to account for many instances of goodwill. Applying a credit line allows the customer to move forward with their purchase or delivery and the company can pay off the costs at their convenience using that credit line.

During onboarding, these past instances of goodwill will be entered using a credit line and this will allow us to calculate how much goodwill has affected the company balance sheet by way of getting an accurate accounts receivables figure.

Credit lines & Onboarding to

During onboarding, the credit line feature will be used to enter already existing orders that have not yet been paid for. This will allow us to calculate the total accounts receivables outstanding from day one.

Many companies will discover that they have given out too much credit and have large accounts receivables after the onboarding has been completed.

The accounts receivables aging summary report will be used to manage the credit lines once they have been entered and used by a customer. The accounts receivables aging summary report will be covered in greater detail below.

Setting up a Credit Line.

First, identify the customer in need of a credit line.

Then ask a manager to assist with the next few steps.

Navigate to the customer details page for that customer. This can be done by clicking the blue names on any quote or order.

Look for the credit lines tile.

When first setting up a credit line for a customer the tile will show all zeros.

Click the Edit button to open the popup menu.

Enter the desired credit amount. This amount should be equal to or greater than the purchase history of that customer in one quarter of a year for Company(builder) customers.

If an individual is in need of a credit line. The amount should be equal to the current purchasing needs of the customer. Never give an individual customer more credit than their purchase requires.

Terms default to Net 30. This can be adjusted based on the ability of the customer to pay the balance due back to the company. This selection affects how the accounts receivable report totals their balance due.

NET 30

NET 60

NET 90

Then save.

The manager has completed setting up the credit line for the customer.

The salesperson can now see “credit line” as an option when applying payments to quotes. The available balance will always be visible on the customer details page and when applying payments to quotes.

Once the salesperson has applied the credit line payment the quote will convert to an order. If you are looking for more information on how to apply payments click here. (link here)

Paying back Credit Lines on orders

Navigate to the order containing the credit line.

The credit line tile will contain a “+ Pay Credit Line” button. This button will be used when the customer is ready to pay at a later date. This button behaves identically to the “Apply Deposit/Payment” button.

If you are looking for more information on how to apply payments click here.(link here)

The “NOT PAID” icon will be present throughout the order till the credit line has been paid off.

Once the payment has been applied to the credit line. That balance due will update on the order and the customer page.

If the credit line has been paid off in full the tile will show a “PAID” icon and will contain the payments made against that credit line.

It is common for a customer to pay off multiple credit lines at once, usually by check. A single check can be used to pay off multiple credit lines. This split will need to be calculated by hand.

Any employee can navigate to the customer page to see how much credit is currently in use by that customer.

Managing Credit lines

Companies using must take special care of their accounts receivables. As discussed above allows for the opportunity that a salesperson will be paid their portion of commission before the customer has paid for their order. This compounds the liability and causes further damage to the balance sheet.

One employee, often upper management should be responsible for collecting funds from customers for delivered orders. It will be their responsibility to ensure credit line customers pay on time and in full if the product has already been delivered.

Many companies required that payment be paid in full by the time of delivery. The salesperson managing the order can be in charge till delivery has occurred. At this point, a manager must take over the responsibility to ensure that the customer pays on time and in full.

It is not recommended to put all responsibility on the salesperson managing the order. Salespeople can be easily interrupted by customers leading to payments not being made until the next day, and the next day, and the next day, and so on.

With the help of upper management, these cases can be mitigated and only troubled customers will remain.

This employee will use the Accounts Receivables Aging Summary report to assist in this task.

Accounts Receivables Aging Summary

To find this report select “Reports” from the home bar across the top of the page.

The Accounting section on the right contains the Accounts Receivables Aging Summary.

The filters across the top of the page can be used to filter the results shown below.

Each row will contain the relevant info for that order. The right side will show the age and total of the balance.

Rows can be clicked to quickly open the order in a new tab.

For more info about this report please reach out to support with your questions.

Removing/Reducing/Increasing a customer's Credit Limit

Start by returning to the customer details page for that customer.

Only a manager will be able to complete the next steps.

Click the Edit button on the credit line tile.

The Limit can be edited to any larger amount. The system will not prevent you from increasing a credit limit in any way.

The Limit can be edited to a lower amount. This amount cannot be lower than the currently in-use amount. If the customer is not using any of the credit limit it can be lowered to zero to completely remove access to credit lines for that customer.

Then save

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