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Define the limit before using the number
An internal credit limit is a management control: decide what you will count and who can approve an exception. A sales-value limit for invoices and committed orders is different from a limit on unrecovered production cost. Use one stated method consistently.
Export Development Canada (EDC)’s insurance guidance tells its policyholders to compare a credit approval with amounts owed or to be owed. That is a useful distinction, not an EDC approval for your customer or a required limit for every business.
An order can exceed the limit before it is invoiced
Fictional example, in U.S. dollars: management sets a US$50,000 internal limit that counts unpaid invoices, delivered-but-unbilled work and newly committed order value at 100%. This is a chosen policy, not an insurance definition.
| Exposure included in this example | US$ |
|---|---|
| Unpaid invoices | 32,000 |
| Delivered work not yet invoiced | 7,000 |
| Proposed new order commitment | 18,000 |
| Exposure after releasing the new order | 57,000 |
| Amount above the chosen 50,000 limit | 7,000 |
Only a supported change creates headroom
If the customer makes an agreed US$10,000 payment that becomes available and is applied to the outstanding balance before release, the same comparison falls to US$47,000. It then sits US$3,000 below this limit. A promised transfer does not change the ledger in the same way.
Confirm that amounts are not duplicated between delivered work and invoices. If an insurer changes or withdraws cover, reassess it separately; an internal exception cannot amend an insurance policy.
Give the exception a reason, owner and expiry
Ask the team to record the balance date, disputed items, evidence of payments, current orders and the next proposed commitment. An exception should identify who approved what, for how long and why the additional risk is acceptable.
Possible choices include seeking more information, changing payment stages or limiting a new commitment within the actual agreement. The limit does not create an automatic right to stop existing contracted work. Keep the customer ledger beside the wider monthly cash plan.
Scope
- Fictional internal-control method, not a recommended limit, insurer approval, credit score or determination of debt or contract remedies.
Next step
Use Cash runway for the monthly business position; keep the separately defined customer-exposure ledger and release/exception record beside it.
Sources & review notes
Export Development Canada
Passage, dates and research notes
official-guidance · Amount owed or to be owed; discretionary limits and credit approval
Policy guidance used as a commercial-control example, not insurance eligibility or approval for this reader.
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