In the world of business-to-business credit, there is an ongoing argument if you should tell your customers what their credit limits are. There is no right or wrong answer to this question and the decision to tell your customers about their credit limit needs to be part of your credit policy and a company decision.
The arguments for telling your customers about their credit limits:
It shows transparency and builds trust: telling your customers about their credit limit demonstrates a commitment to a strong customer relationship and provides transparency through the whole process, which in turns builds a trust.
Customers may feel a loyalty to your company as you build the trust to share details of their credit limit.
Customers are able to proactively manager their business with you if they know their credit limit at all times.
Sharing the credit limit with a customer opens up potential for improved negotiations. When close to a credit limit, customers may be willing to discuss paying earlier, prior to due dates to manage their obligations.
All of the above, works towards building a stronger relationship with your customers, by showing the mutual respect of sharing credit limits.
The arguments for not telling your customers about their credit limits:
When customers know their credit limits, they may use the information to push sales teams to take on additional orders outside of the credit limit by talking about taking orders to competitors.
Your credit limits are an indication on your internal strategies around risk. Sharing the information could provide others with a window into your process for managing your exposure.
Knowing their spending limit may risk some customers too over extend themselves by spending up to their limit quickly leading to potential liquidity issues.
Telling your customers about their credit limits may result in awkward discussions when customers request details of why their credit limits are not higher as they believe they are a stronger company financially.
Finally, if telling customers their credit limits and then allowing them to go above their limits, ensure you keep solid documentation to avoid any potential legal discussions if customers claim their default is due to your negligence of allowing them above the credit limit.
Ultimately, there is no right or wrong answer. As a company and a credit department, you will need to make a decision and have a consistent approach.
