How do I calculate credit utilisation?

Divide the current balance owing by the credit limit and multiply by 100. For example, a $38,000 balance on a $50,000 limit is 76% utilisation. Add any approved-but-unbilled orders to the balance to see projected utilisation before you ship them.

What is a safe level of credit utilisation for a trade account?

There is no fixed rule, but utilisation below 40% is generally low risk, 40–70% is moderate, 70–90% is high and worth monitoring closely, and 90% or above is critical — the account is at or near its limit and further credit should usually be paused until the balance is reduced.

What should I do if a customer is over their credit limit?

Hold new orders and require payment of the outstanding balance before releasing further credit. If the balance is also overdue, issue a letter of demand. Merion can recover the debt on a commission-only basis if the customer continues to ignore your terms.

Free tool

Credit Utilisation Calculator

See at a glance whether a customer is using too much of their credit limit. Enter the limit, the current balance owing, and any pending orders to get current and projected utilisation, remaining headroom, and a clear risk band — so you know when to keep shipping and when to pause for payment.

Account details

Credit limit (AUD)

Current balance owing (AUD)

Pending / unbilled orders (AUD)

$optional

Include any approved but not-yet-invoiced orders to see projected utilisation before you ship.

What counts as healthy credit utilisation?

Credit utilisation is the proportion of a customer's credit limit they are currently using. A low figure means the account is operating comfortably; a high figure means there is little room left before the limit is reached. As a rule of thumb, sustained utilisation above 70% warrants closer monitoring, and anything at or above 90% should pause further credit until the balance is brought down.

Projected utilisation adds approved-but-unbilled orders to the current balance, so you can see where the account will sit once those orders are shipped. If projected utilisation pushes the account over its limit, hold the new orders or require payment first.

This calculator is for illustrative purposes only — not financial or legal advice. Utilisation bands are general guidance and do not replace your own credit policy or a formal credit assessment. Seek professional advice before changing a customer's credit terms.

Utilisation as an early-warning signal

A rising credit utilisation figure is one of the earliest signals that a customer is starting to struggle. Long before an invoice falls overdue, an account that is steadily consuming more of its limit — and leaving less headroom — is telling you that cash is getting tighter. Tracking utilisation on every trade account, not just the overdue ones, lets you act while you still have options rather than after the balance has ballooned.

Current versus projected utilisation

Current utilisation measures what the account owes today against its limit. Projected utilisation adds approved-but-unbilled orders, so you can see where the account will sit once those orders are shipped and invoiced. If projected utilisation pushes the account over its limit, that is the moment to hold the new orders or require payment first — not after the goods have left the warehouse and the exposure is locked in.

What to do when an account runs hot

When utilisation climbs into the high or critical band, tighten terms before extending more credit: ask for payment on ageing invoices, reduce or freeze the limit, and watch the trend closely. If the balance is both high and overdue, escalate to a letter of demand. Where a customer keeps drawing on credit while ignoring your terms, Merion can recover the outstanding balance on a commission-only basis.

This is an indicative calculation only — not financial or legal advice. Utilisation bands are general guidance and do not replace your own credit policy or a formal credit assessment. Seek professional advice before changing a customer's credit terms.

Before it becomes a bad debt

Account over its limit and overdue? Merion recovers it.

Commission-only recovery — no recovery, no fee. We pursue the full outstanding balance including any applicable interest.

Refer a debt Letter of demand template

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