How should I set a credit limit for a new customer?

For a new customer, start conservatively — set a limit based on a fraction of your expected monthly revenue from them, and increase it once they have demonstrated they pay reliably. Always require a signed credit application before extending credit, and consider a personal guarantee for higher limits.

What information should I collect before setting a credit limit?

At minimum: a completed credit application including ABN/ACN, trading references, and the authorised signatory's details. For larger limits, also obtain a credit bureau report, bank references, and a personal guarantee from the director(s). Verify the ABN is active via the ABN Lookup tool.

Can I change a customer's credit limit?

Yes. Credit limits should be reviewed regularly — at least annually, and more frequently if a customer's payment behaviour changes. You can increase a limit for customers with a strong payment record, or reduce or suspend a limit if a customer starts paying late.

What should I do if a customer exceeds their credit limit?

Stop supplying on credit immediately until the outstanding balance is reduced below the limit. Contact the customer to arrange payment of the excess. If the customer is unable or unwilling to pay, refer the overdue amount to Merion for collection.

Free calculator

Credit Limit Suggester

Setting the right credit limit protects your cash flow while giving customers the flexibility they need. This tool suggests a starting credit limit and risk rating based on your customer's expected spend, payment terms, trading history, and payment behaviour.

Customer details

Customer's estimated annual spend with you (AUD)

Your expected annual sales revenue from this customer.

Payment terms offered (days)

Trading history with this customer

Payment record

How the suggested limit is calculated

The base limit is calculated as one month's expected revenue multiplied by a payment factor based on your terms (e.g., 30-day terms = 1.0, 14-day terms = 0.47). This is then adjusted downward for newer trading relationships and for customers with a history of late payment.

The result is rounded to the nearest $500 for practical use. It is a starting point — not a definitive assessment.

Always pair this with a credit application

A suggested credit limit is only as good as the information behind it. Before extending credit, always require a completed credit application, verify the customer's ABN via the ATO's ABN Lookup, and consider running a credit bureau check for larger limits.

For limits above $20,000, consider requesting a personal guarantee from the customer's director(s). Our credit application checklist covers all the key information to gather.

This is a guide only — not financial advice. Credit decisions involve risk that no calculator can fully quantify. Set credit limits based on your own credit assessment, including a signed credit application, trade references, and where appropriate, a credit bureau check.

Customer gone over limit?

Merion recovers what's owed — commission-only.

When a customer exceeds their limit and stops paying, refer to Merion. No recovery, no fee.

Get a free debt appraisal Refer a debt to Merion

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How the suggested limit is calculated

Always pair this with a credit application

Merion recovers what's owed — commission-only.

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