Credit headroom

Credit limit less outstanding balance per trade account. An account with little headroom whose purchases flattened, or whose orders were held for credit, is constrained by credit rather than demand. Good payers get a limit review; slow payers get a collections conversation.

DefinitionCredit limit less outstanding balance per trade account. An account with little headroom whose purchases flattened, or whose orders were held for credit, is constrained by credit rather than demand. Good payers get a limit review; slow payers get a collections conversation.

Joined, or nobody's

Credit control sees the limit; sales sees the flat purchases. The join shows a customer who wants to buy more.

Cash accounts

Not unlimited. Excluded and counted.

How it is computed

Credit limit minus outstanding balance, as a share of the limit, per account, read beside payment record and the recent purchase trend.

Example

A contractor with a $50,000 limit has a balance of $48,600 and has paid to terms for three years. Purchases stopped mid-month for the third month running. It is buying elsewhere from the 20th.

Where it goes wrong

Sales sees a quiet account and credit control sees a full limit, in different files. Nobody joins them.

Articles that use this term

Coverage and territory · Construction and building materials

Accounts opened and never used: the trade account funnel per branch

How a builders' merchant or trade supplier measures what happens after a trade account is opened, from the account master and the ledger: accounts opened per branch, the share with a first purchase within thirty days, the share still buying at six months, the median first-purchase value, and the branches and account openers whose funnel leaks at each step, so that the opening effort produces customers rather than records.

16 Sept 20262 min read Data quality and reconciliation · Construction and building materials

Credit limit headroom: the accounts that stopped buying because they hit the limit

How a builders' merchant or trade supplier finds the accounts whose purchasing is constrained by their credit limit rather than by demand: headroom from the credit file and the ledger, orders held or refused for credit, the accounts at the limit whose purchase pattern flattened, and the two decisions that follow, a limit review for the good payers and a collections conversation for the rest.

16 Sept 20262 min read Wallet share and penetration · Construction and building materials

Ten questions a builders' merchant managing director asks, and the table that answers each

The ten questions the managing director of a builders' merchant puts to the branch managers, which trade accounts buy below their trade's norm, which accounts were opened and never used, which good payers are stuck at their credit limit, which contractors won projects nearby and have no account, which accounts lapsed against their own cadence, what is category share per branch, which branches have not typed their accounts, which counter customers deserve an account, what is contribution per account after drops and returns, and what changed, each with the table from the ledger, the account master, the credit file and the project data, and the answer to send back.

16 Sept 20263 min read Alternatives and comparisons · Construction and building materials

How to choose analytics software for construction and building materials: questions, data and traps

How builders' merchants should choose analytics software: start from the questions, check the data you hold, ask vendors ten questions, avoid the traps.

24 Sept 20264 min read Board and management reporting · Construction and building materials

Sales KPIs for builders' merchants and construction suppliers: ten measures that matter, each with its formula and the export it comes from

The ten sales KPIs a builders' merchant or construction materials supplier should run on, each with its formula, the export it comes from and what it tells you: category share by trade, account activation, dormant trade accounts by prior value, credit limit headroom, project pipeline matched to accounts, quote conversion, branch coverage of key accounts, price realisation against terms, delivered against collected mix, and contribution per account. Also the three measures most merchants miss, the figures to drop, the identities, and who owns what.

17 Sept 20264 min read