Credit limit gate for B2B orders and per-customer payment terms

What a credit limit gate solves (in plain language)

B2B orders can look healthy on paper and still cause a cash crunch. Unlike card payments, many business customers pay later. If you keep shipping while invoices pile up, one slow payer can quietly tie up a big chunk of your working cash.

A credit limit gate is a simple safety check before an order is fully accepted. It compares what the customer already owes (and what they are about to owe) against an agreed credit limit. If the new order would push them over the limit, the system doesn’t reject the order forever. It pauses the order for review.

Holding an order usually means the order is recorded, but key steps are blocked until someone clears it. You can still confirm details with the buyer, and you may reserve inventory if that’s your policy. What you typically don’t do is ship, invoice, or permanently allocate stock until the hold is released.

Payment terms change the risk because they change how long your money is tied up. Prepay is low risk because cash arrives first. Net 30 can be fine if spending stays within the limit and invoices are paid on time. Net 60 (or custom terms) increases exposure for longer.

A gate also reduces confusion between teams because it turns “can we ship this?” into a visible, consistent status for sales, finance, and ops.

Define what you store per customer (limits, terms, exposure)

The gate only works if the customer record contains a few fields your backend rule can trust. Keep the list short and make every value easy to explain.

Start with the credit limit: the limit amount and the currency it’s defined in. If you sell in multiple currencies, pick one rule and stick to it. Either convert everything to a base currency before comparing, or store limits per currency.

Next, store payment terms as structured data, not free text. Use a clear type (Prepay, COD, Net 15, Net 30, Net 60) and store the number of net days when relevant. That way your order logic can branch without guessing.

A practical per-customer set looks like:

• Credit limit amount and currency
• Payment terms type and net days (if relevant)
• A temporary override amount (optional) with an expiry timestamp
• An override note (why it was granted and by whom)
• A manual hold switch (a “stop” button)

Define “exposure” in a way that matches how you actually carry risk. Many teams include unpaid invoices plus open orders that haven’t been paid, and sometimes pending shipments if you invoice after shipping.

Finally, keep a small set of order statuses so holds are visible and actionable. For example: Approved, On hold, Released, Cancelled.

Data model you need for limits, terms, and order holds

Your data model should make three questions easy to answer: who is buying, on what terms, and what they already owe.

Start with a Customer record that carries the decision inputs: credit limit, default payment terms, and a hold policy (for example, auto-hold when over limit, allow but flag, or block checkout).

Orders should capture both the trigger and the outcome. Store the payment method, the order total, and a status that can represent “On hold” without overloading “Pending.” Add a hold reason so people can tell the difference between “over credit limit” and other issues (like address verification).

A minimal schema often includes:

• Customers: credit_limit, payment_terms_code, hold_policy, credit_status
• Orders: total_amount, payment_method, status, hold_reason, held_at
• Invoices / AR: invoice_total, open_balance, due_date, status (open/paid/void)
• Credit overrides: customer_id, override_amount_or_limit, expires_at, approved_by
• Audit log: entity_type, entity_id, changed_fields, changed_by, changed_at, note

To calculate exposure reliably, you need accounts receivable data (invoices or an external sync) so unpaid balances aren’t guessed from orders. If you don’t have invoicing yet, store an “open balance” snapshot on the customer and update it from posted payments.

Keep overrides in a separate table. It prevents messy edits to the main credit limit and gives you an approval trail.

How to calculate credit exposure and available credit

The math needs to be agreed on and written down, then used consistently across the app and finance reports.

A common baseline is:

Credit exposure = unpaid invoices + open order value

Then:

Available credit = credit limit - credit exposure

Before implementing it, define what “value” means. Many teams use product totals minus discounts, then make an explicit call on whether to include tax and shipping. If you include tax and shipping, holds trigger earlier. If you exclude them, you risk approving orders that end up over limit once the invoice is finalized.

A few adjustments prevent surprises:

• Partial payments reduce unpaid invoices only when cash is actually received (not when a payment is “initiated”).
• Credit notes and refunds reduce exposure only when issued and approved for use.
• Canceled orders should drop out of open order value immediately.
• Returns usually reduce exposure after the credit note is approved, not when the return is requested.

Timing matters as much as the formula. Pick clear update points so numbers are predictable:

• On order creation or order approval (choose one and be consistent)
• On invoice issuance (move value from open orders to unpaid invoices)
• On payment posting (release exposure)

If you sell in multiple currencies, convert exposure into the customer’s credit currency using a consistent rate (for example, the daily rate at invoice date). If you support parent accounts or subsidiaries, decide whether limits are per legal entity or shared across the group, and make that visible on the customer record.

Step by step: build the backend rule that holds orders

The gate works best when it runs automatically every time an order is created or changes.

1. Save the order as a draft first, even if the buyer submits it in one click. Capture the customer ID, order total, currency, and a snapshot of payment terms so later edits to the customer profile don’t rewrite history.

2. Fetch the customer’s current exposure (based on your definition). Calculate projected exposure by adding the new order total.

3. Apply a simple decision:

• If projected exposure is within the credit limit, mark the order as Approved.
• If projected exposure exceeds the limit, set the order to On hold.

4. When holding the order, record details that make the decision easy to explain later:

• Hold reason (for example, “Credit limit exceeded by $2,450”)
• Next action owner (for example, “AR team” or a specific manager)
• An audit record with the inputs used (limit at the time, exposure components, who triggered the check, timestamp)

5. Re-check exposure on the events that change the numbers, not just on creation. Common triggers are edits that change totals, shipment (if your policy treats shipment as commitment), invoicing, and payment posting.

Approvals and notifications so held orders don’t get stuck

A hold is only useful if it leads to a quick, trackable decision.

Define who can release a hold. Many teams use finance for credit decisions and a sales manager as a backup for urgent cases. Make it explicit with roles and permissions, and always record who approved (or rejected) and why.

What to show on the approval screen

Keep the screen short, but include the numbers an approver needs:

• Credit limit, current exposure, available credit
• Order total and how far over limit it would go
• Payment terms on file and requested terms (if different)
• A small set of customer status notes (for example, “new account” or “past due once”)
• A required comment field

After the decision, write an approval log entry (order ID, decision, approver, timestamp, comment). This becomes the audit trail and helps support explain delays.

Notifications and time limits

Notify the right people the moment an order is held, using channels your team actually reads (email, SMS, or Telegram). Add reminders and escalation so holds don’t sit silently. One practical pattern is a reminder after 2 hours, escalation after 24 hours, and auto-cancel after 72 hours if nobody reviews it.

If a full release is too risky, allow conditional releases (partial shipment, deposit required, shorter payment terms) and record the condition so fulfillment and invoicing follow the same plan.

Operational flow: what happens after an order is held

Treat a held order like a normal order with one clear difference: it can’t move forward until the hold is resolved.

Sales, ops, and finance should all see the same hold signal. Use a status like “On credit hold” plus a reason field (for example, “Exposure exceeds limit by $1,240”). Add a short internal note so people don’t have to guess.

Warehouse rules should be strict: on-hold orders don’t get picked, packed, or allocated. If you reserve stock, reserve it only after release, or use a short reservation window so a held order doesn’t block paid orders.

For customer communication, keep the message neutral and practical, with a clear next step. For example:

• “Your order is temporarily paused for a routine account review. Reply to confirm payment timing, or request a partial shipment.”
• “We can ship as soon as payment is received or the credit limit is adjusted. Which option works best?”
• “We can split the order and ship the items that fit within your available credit.”

When payment arrives, choose between auto-release and manual release. Auto-release works well when payments reliably match invoices. Manual release is safer when payments are partial or unclear. A common compromise is auto-release only when payment fully covers the overdue balance; otherwise route to finance.

Track a few metrics to keep the gate healthy: number of held orders, percent released within 24 hours, average time to release, and top reasons for holds.

Example scenario: a wholesale order that exceeds the threshold

A wholesale customer, BrightSide Supplies, has Net 30 payment terms and a credit limit of 50,000.

Their unpaid invoices total 38,000. They place a new order for 15,000.

Projected exposure is 38,000 + 15,000 = 53,000. Since 53,000 is above the 50,000 limit, the order is placed on hold and routed to finance for review. Sales can still see the order, but it can’t be packed, shipped, or invoiced until the risk is reduced.

Finance usually has a few options: request a deposit so exposure drops under the limit, reduce the order to fit within available credit, or approve a temporary override with an expiry date and a reason note.

Quick checklist before you turn it on

Before you enable the gate in production, do a short pre-flight pass. A few hours of testing can save days of cleanup later.

Start with a small, varied test set (5 to 10 customers): one with Net 30 and a low limit, one with a high limit, one prepaid, one with multiple open invoices, and one that often edits orders after checkout.

Verify two things:

• The exposure math matches what accounting expects (including what you count and what you don’t).
• The hold rule runs at the right times: order creation and any edit that increases exposure (quantity change, price change, shipping added, discount removed).

Walk through one held order end to end and confirm the hold reason is clear, shipping and invoicing behave exactly as intended, notifications go to the right people, and a payment reversal can re-hold (or flag) safely.

Common mistakes and how to avoid them

Most problems aren’t technical. They happen when the rule checks the wrong number, or when people learn how to work around it.

Common failure points:

• Treating the full order grand total as “exposure” instead of unpaid and committed amounts.
• Ignoring approved orders that haven’t shipped yet, allowing customers to place several large orders in a day before any invoice exists.
• Allowing money-changing edits after approval without re-checking credit.
• Allowing overrides without a clear audit trail.
• Adding so many exceptions that the gate becomes optional.

Keep prevention simple: define exposure in one sentence, re-run the gate on any money-changing edit, require a reason and approver for overrides, and keep exception types short.

Next steps: implement the gate in your order app and iterate

Start with the smallest version that prevents real risk: “If exposure after this order exceeds the customer’s limit, set the order to On hold.” Run it for a week, then add exceptions only when you can name them clearly (for example, temporary overrides approved by finance).

If you’re building the order app without hand-coding, AppMaster (appmaster.io) can be a practical option: you can model customers, orders, invoices, and overrides visually, then implement the hold logic as a backend business process that recalculates exposure on create, edit, invoicing, and payments.

Keep the first release boring and predictable. Improve it based on what finance and ops actually see every day.