Managing Credit Limits in ERPNext: A Real-World Business Control Solution

When growing businesses extend credit to customers, it’s crucial to strike a balance between sales enablement and financial control. This is especially true in industries where credit-based sales are common and customer payment behavior directly impacts cash flow.

Recently, our team at Faircode Infotech implemented a Credit Limit Restriction Management System in ERPNext for a client in the B2B distribution sector, enabling real-time control over customer credit exposure while streamlining their sales process.

Industry & Business Type

This solution is ideal for:

Wholesale & Distribution businesses
Manufacturers with channel partners
Service providers offering credit-based billing
Trading companies and import-export firms

Our client distributes industrial and commercial products to retailers and corporate customers on credit terms. Delays in payments and frequent over-crediting created financial risks and poor visibility into receivables.

The Problem: Credit Overruns and Manual Checks

Prior to this solution:

Sales teams were manually verifying customer balances.
Orders were placed even when limits were exceeded, leading to bad debts and blocked cash.
There was no automated warning or block when overdue invoices existed.

The company needed an automated way to enforce credit rules, prevent new orders for customers with outstanding payments, and improve collection discipline.

The Solution: Credit Limit Restriction in ERPNext

We implemented a custom credit control mechanism in ERPNext that:

Restricts Transactions If:

The customer has overdue invoices, or
The total outstanding amount exceeds the defined credit limit

Real-Time Validation:

When a Sales Order or Delivery Note is created, the system checks:

Total Outsanding
Overdue Invoices
Credit limit assigned to the customer

If the conditions are not met, the system blocks the transaction and shows a warning:

“This customer has exceeded their credit limit or has overdue invoices. Please clear dues before proceeding.”

Intelligent Features:

Admin override allowed via user role
Alerts for sales and accounts teams
Credit limit and aging dashboard

Business Benefits

For Management:

Better cash flow forecasting
Reduced risk of bad debt
Visibility into real-time credit exposure

For Sales Teams:

Automated checks reduce errors
Focus on creditworthy customers
No need to manually track overdue accounts

For Accounts Teams:

Integrated customer aging reports
Flags risky customers for follow-up
Aligns finance policy with ERP workflows

ERPNext Modules Involved

Sales (Sales Order validation)
Accounts Receivable (Invoice aging, outstanding balance)
Customer Master (Credit limit settings)
Role Permissions (Override and access control)
Custom Scripts (For transaction blocking logic)

Final Thoughts

Credit control is more than just a financial rule—it’s a business safeguard. With ERPNext’s flexibility and our domain expertise, we transformed a simple accounts problem into an automated, policy-driven solution that brings structure, accountability, and financial discipline to daily operations.

This use case proves how ERPNext can be customized beyond standard modules to reflect real business policies—helping companies grow without growing risks.

Interested in Building Similar Controls?
Whether you’re a CFO, operations lead, or ERP admin, if credit discipline matters to your business, ERPNext + Faircode can help you enforce it with confidence.

📩 Reach out to us to know how we can enable ERPNext to work your way.