Credit Limit Blocked by a Disputed Invoice

Read the calculation first. The check compares the credit limit against open AR plus open order value: 212,000 + 58,000 = 270,000, which exceeds 250,000. The disputed invoice still occupies 46,000 of headroom until it is credited - a dispute is not a credit memo.

Sequence:

1. Verify the short delivery. If it is real, raise a return order or credit note for the short quantity. Balance drops to 166,000; 166,000 + 58,000 = 224,000, inside the limit, and the order releases on the next check. This is the cheapest correct fix and it also corrects the ledger and the customer relationship.
2. If the customer is wrong, the invoice stands and the order stays blocked. Escalate the dispute, not the limit.
3. If sales genuinely must ship before the credit note posts, use a controlled exception: release the order from credit hold with a reason code, a named approver and an expiry, so the exception is visible in the audit trail.

Do not raise the limit to $320,000 on a sales request. A limit change is a credit decision - it should follow a credit review of financials, payment history and DSO, not a shipping deadline. It also institutionalises the dispute and doubles your exposure to a customer who is currently not paying.

Do not set the customer to no-check. That removes the control for every future order, permanently and invisibly.

Cause: aging period definitions have an aging basis - invoice (document) date or due date. Aging by invoice date puts a Net 60 invoice at day 45 into the 31-60 bucket even though nothing is due, and the collection letter sequence fires off that bucket.

Fix:

• Change the aging basis to due date on the aging period definition used for collections, or maintain two definitions (domestic, export) and select the right one in the customer pool and in the aging snapshot.
• Review the collection letter codes themselves: each has a minimum grace period and a minimum amount, so the first letter should not fire on the due date itself.
• Rebuild aging snapshots after the change. Existing snapshots keep the old basis, so a report pulled from an old snapshot will disagree with the new one.

Side effects to expect:

• Cash flow reporting changes shape - the same receivables move buckets, so prior-period comparisons break.
• Customers who were being chased early now disappear from the collections worklist entirely; confirm the due-date aging still surfaces genuinely overdue export invoices, otherwise you have traded a nuisance for a blind spot.

Small balances (under $300): use the write-off process, not a credit note. A write-off posts a write-off transaction against the customer posting profile's write-off account, with a reason code and a write-off limit, removes the balance from aging and leaves the original invoice intact for audit. Run it as a quarterly controlled process with approval.

Tax check: writing off a debt does not automatically reverse the sales tax originally charged. If you are VAT/GST registered, the write-off entry must include the tax adjustment or you will have written off net but still owe the tax.

Larger uncollectible amounts: two stages, and they are not the same accounting event.

• Provision: post a bad debt allowance so the receivable stays on the books and the P&L takes the hit. This is the right treatment while you are still chasing.
• Write-off: only when the debt is confirmed uncollectible, after approval and after collections escalation, do you remove the receivable.

Never use a credit note for bad debt. It reverses revenue, reverses tax, and corrupts the sales analysis - the sale happened, it just was not collected. And do not let the $300 policy become a dumping ground: a $40,000 balance written off under a small-balance process is an audit finding.