How to set up credit limit locks in Business Central

Every business understands the importance of enforcing credit limits to mitigate risk. To support these controls, Microsoft Dynamics 365 Business Central enables businesses to specify different credit limits by customer. Once a credit limit is specified, it is important to be able to enforce restrictions to stop over credit limit sales orders by providing warnings and implementing an approval process. In this post, we will walk you through how to set up credit limit warnings and credit limit locks for sales orders that exceed a customer’s credit limit and require approval in Business Central.

When you specify a credit limit for a customer in Business Central, the system automatically calculates if a customer is over or under their outstanding balance. Additionally, Business Central enables you to determine how you want your users to be informed when a customer exceeds their credit limit.

To set up credit limit and overdue balance notifications, follow the steps below:

1. Search for and select Sales & Receivables Setup
2. Under the General section, select the Credit Warnings dropdown
3. Select the warning you wish to receive
   • Credit Limit – notifies users when a sales order exceeds the customer’s credit limit
   • Overdue Balance – notifies users when a customer has an overdue balance
   • Both Warnings – turns on both the Credit Limit and Overdue Balance warnings. This setting is recommended.
   • No warnings – turns off both the Credit Limit and Overdue Balance warnings

With both warnings activated, users will receive notifications if a sales order exceeds the customer credit limit and if the customer has an overdue balance.

While the increased visibility on a sales order is a good start, Business Central will not restrict users from posting a sales order even if it exceeds the customer’s credit limit. To block sales orders that exceed a customer’s credit limit and implement a credit limit approval process, Rand Group has developed the Credit Limit Lock for Business Central application.

The Credit Limit Lock for Business Central application allows you to implement automatic controls for sales orders that exceed a customer’s credit limit. This custom application seamlessly integrates with Business Central and allows you to implement credit limit approval processes that prevent sales orders from being posted if the customer is over their credit limit. The sales order will only be able to be released and posted if overage has been approved. Additionally, all approvals will be logged in an audit log for traceability. This intelligent application enhances Business Central’s native functionalities to increase controls, mitigate financial risk, and enforce credit limit restrictions.

With the Credit Limit Lock application, there are two ways to set up credit approvals. The first is an approval password that allows anyone with the password to approve over-limit sales orders. The second option does not require a password and is based on approval levels.

Option 1: Use a password for approvals

With the Credit Limit Lock for Business Central application, you can create a password for credit approvals that allows any user with that password to approve sales orders that exceed a customer’s credit limit.

To block over limit sales orders from being released and require a password to approve the credit limit overage, follow the steps below:

1. Search for and select Credit Limit Setup
2. Select Enabled for Customers
3. Enable the Block Sales Order Release option
   This blocks Sales Orders that exceed a customer’s credit limit from being released
4. Enable Use Password for Approvals
5. Specify the Approval Password

Once this setup is complete, any sales orders that exceed a customer’s credit limit will require the approval password to be entered before the sales order may be released. If a user attempts to release or post a sales order with a line amount that exceeds a customer’s available credit limit, Business Central will generate an error requiring Credit Limit Override.

To override the Credit Limit Lock on a sales order that exceeds a customer’s credit limit, follow the steps below:

1. Navigate to the Credit Limit Override Approval section
2. Toggle the Approved Field
3. In the dialogue, enter the Approval Password
4. Select OK

The Approved field will be toggled and you can release and post the sales order. Additionally, the Approved By field will populate to provide an audit trail of who approved the credit limit override. Once an order is approved, any changes to the sales order total will require Credit Limit Override Approval again.

Option 2: Set up approval levels

Instead of setting an approval password, you may also set approval levels that identify specific users that will be able to approve credit limit overages. For each user, you can specify their approval level which can be based on either the maximum approval amount or maximum approval percentage.

To block over limit sales orders from being released and set approval levels to approve the credit limit overage, follow the steps below:

1. Search for and select Credit Limit Setup
2. Select Enabled for Customers
3. Enable the Block Sales Order Release option
   This blocks Sales Orders that exceed a customer’s credit limit from being released
4. Disable Use Password for Approvals
5. Select Approval Levels
6. Set the User Name and either Max. Approval Amt. or Max. Approval % for every level of approval required. For each user, you can only specify either the Max. Approval Amt. or the Max. Approval %.

The user will be able to override the Credit Limit Lock for sales orders that exceed the customer’s available credit limit only if the total amount over limit is within the user’s approval level. If the amount over limit is not within the user’s Approval Level, Business Central will generate an error notifying the user that the order amount has exceeded the user’s approval level.

To override the Credit Limit Lock on a sales order that exceeds a customer’s credit limit, follow the steps below:

1. Navigate to the Credit Limit Override Approval section
2. Toggle the Approved Field

If the Customer’s amount over limit is within the user’s approval level, then the Approved field will be toggled and you can release and post the sales order. Additionally, the Approved By field will be populated to provide an audit trail of who approved the credit limit override. Once the sales order is approved, any further changes will require Credit Limit Override Approval again.

Credit limits are necessary for mitigating financial risk. Business Central includes native functionality to implement credit limits and notifications for when a customer’s credit limit is exceeded. However, Business Central will not restrict users from releasing or posting a sales order even if it exceeds a customer’s credit limit. To increase controls and to implement a credit limit override approval process, businesses can leverage the Credit Limit Lock for Business Central application by Rand Group.

Rand Group is a dedicated Microsoft Dynamics 365 partner with years of experience implementing, supporting, and extending Business Central to do more for our clients. To learn more about the Credit Limit Lock and how to mitigate financial risk, contact Rand Group today.