As a result of the scoring, every customer gets a score value, which is correlated with a risk category. The higher the score value, the lower the risk category for the customer. A percentage of last sales revenues or optionally sales forecast is predefined to each risk category in order to deliver an own credit limit recommendation for a specific credit segment or credit control area. The resulting credit limit recommendation should cover the expected open amounts on average corresponding to the incoming sales orders and invoices under consideration of their payment terms. An easy formula for a recommended credit limit considering only invoices is:
Credit limit = Average monthly turn-over x payment deadline in months