Was this order right to block?
Credit rules protect the business — but rules set years ago can stop profitable orders from reliable customers. Check a fictional block against the policy, then compare four ways to handle the order, with revenue, margin, exposure and expected loss kept apart.
The order was blocked. Did the block follow the policy?
Five checks against the fictional credit file and credit policy. A decision can follow the rules and still deserve a second look.
Four ways to handle the order. Four numbers, kept apart.
Change the assumptions and watch revenue, margin, exposure and expected loss move — separately. None of them is netted into a single “best” figure.
Opportunity, risk, relationship. The credit manager weighs them.
The figures follow your assumptions above. Relationship effects are fictional judgements for illustration.
| Fictional alternative | Commercial opportunity | Credit risk | Customer relationship | Approval needed |
|---|
Illustrative what-if results Margin and expected loss are different kinds of numbers and are not netted. No alternative is shown as optimal.
How a recommendation could read
If a limit review confirms the customer’s payment record, then releasing half now (C) or the full order against 50% prepayment (D) would keep the excess within the credit manager’s authority while the limit itself is reviewed. Whether full release (B) is acceptable is a credit committee decision.
This fictional example does not show that any option is best. Expected loss is an average, not a prediction for this customer. Every release outside the limit needs approval at the level the policy requires.
Keeping the numbers honest
- Revenue ≠ margin ≠ profit. Margin is a separate assumption; overheads are not included.
- Released order ≠ collected cash.
- Exposure ≠ expected loss. Expected loss needs explicit default and loss assumptions.
- Expected loss ≠ what will happen. It is an average over many similar decisions.
- Within policy ≠ risk-free.
- Credit limits and their change history
- Exposure: open receivables and open orders
- Block and release logs with approvers
- Payment history, overdue items and write-offs
- Margins per product or customer
Is this decision worth checking in your organisation?
A 20-minute conversation is enough to find out whether it is worth a closer look.