Trade Limits for Companies

 
 

1. What is the Trade Limits Report?

 

Trade Limits represent the maximum amounts in lei (RON), for which suppliers offer to their clients goods or services on term payment. 

Trade Limits indicate a maximum level of payments between firms, so as the supplier does not sell goods or services to its client, in excess of his capacity to pay for those supplies. Therefore, the supplier can avoid the payment risk of his clients.

2. How to read the Trade Limits Report

The report is made out of two parts: the table, which contains the Trade Limits according with the usual payment terms and the type of payment instrument, and the table with the key financial results of the company.

Trade Limits:

These values represent the maximum recommended amounts, for which suppliers can provide goods to their clients on term payment.

The term "maximum amounts" consist of the total amount of goods or services, a supplier is recommended to provide to the respective client. This total amount can be made out of one or more invoices, and is also called "client trade limit".

Trade Limits are computed based on the financial results of the company, adjusted with risk coefficients related with the activity sector of the firm, and the term of the payment instruments.

Trade Limits for payments with payment instruments (P/Ns and checks) are larger due to the fact that payment through those instruments is regulated by law, and failure to pay them has legal consequences on the respective party.

Limitele Plati la Termen Probabilitate de Insolventa:
 
Negative Trade Limits:
 

In certain cases, Trade Limits computed by RisCo can have negative values. In this case it is advisable that commercial transactions with the firm to be made based on advance or cash payment.

Limite Plati la Termen Probabilitate de Insolventa:
 

3. How does the Trade Limits Report help you

 
  • The report indicates the limits to accept invoices with term payment
     

    The Trade Limits are the maximum amounts a supplier can accept for payment in case of the invoices with term payment conditions. Those limits are determined on the basis of the financial results of the company. For example, a company with a seles revenue of 10,000 ron can face major difficulties in the payment of an invoice for 50,000 ron due in 30 days. Because of this reason, and for limiting the risk of invoice collection, suplliers need to allocate Trade Limits to each of their clients, based on their financial standing and history.

  • Shows the Trade Limits for PNs and checks
     

    Payment instruments on term, PNs and checks, represent both a payment instruments of invoices, and a financial confort element for the suppliers. Should payment on such instruments is not fulfilled on term, the instruments are sent to the bank and the breaching company is registered within the Payments Incidents Central (CIP) with a major or minor indicent, as case might be. Because of those unpleasant consequences for the issuers, companies are reluctant to issue such instruments and not honor payment, therefore, Trade Limits on invoices backed by payment instruments are larger than otherwise.

  • Limits are differentiated by usual payment terms
     

    The suppliers incurs a higher or lower collection risk, according to the accepted payment term. For example, a 30 days payment term incurs a much lower collection risk than a 90 days term. Therefore, maximum Trade Limits vary with the payment term. In the case of the 15 days' payment term however, although it is lower than the 30 days' term, the trade limit is lower due to the fact that the company needs on a very short term the necessary cash flows to repay the invoice, usually in a term shorter than its normal cash conversion cycle.

  • Negative limits indicate that term payments from that company should not be accepted
     

    In case of negative term payments, because of a financial disequilibrium, it is recommended that commercial transactions with the firm to be made based on advance or cash payment.

Additionally, we recommend you the following reports, to gain an as complete as possible interpretation of the financial data of a company:
Financial Rating - indicates the global financial evaluation of the firm, based on its historic financial information
Probability of Default - shows the probability that a company may enter bankruptcy, and the company's value in EUR
Overdue Liabilities - the amounts due to the State Budgets, and which were not paid in due term

4. How can you get the Companies Trade Limits Report

 
Subscription:
 
Acquire a Subscription package from the RisCo Reports Subscription. A subscription includes a certain number of RisCo Credits that allow you to make the reports you want. RisCo credits are valid for 12 months from the date of purchase. Client Account which will be opened at the acquisition of Subscription.
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Trade Limits report