Setting Credit Limits for Debtors and Creditors in Tally Prime
Managing credit effectively is essential for maintaining a healthy cash flow in any business. Tally Prime allows you to set credit limits for both debtors and creditors, ensuring transactions stay within manageable bounds. This article explains how to set up credit limits in Tally Prime with a real-world example.
Step-by-Step Guide
Step 1: Enable Credit Limits in Tally Prime
Before setting credit limits, you must enable the option in Tally Prime:
Go to Gateway of Tally > F11: Features.
Select Accounting Features.
Set Maintain Bill-wise Details to "Yes".
Set Set Credit Limits to "Yes".
Press Ctrl+A to save the settings.
Step 2: Create or Alter Ledger for Debtor/Creditor
Credit limits are set while creating or altering a ledger for a debtor or creditor:
Go to Gateway of Tally > Accounts Info > Ledgers.
Choose Create to add a new ledger or Alter to modify an existing one.
Enter the name of the debtor or creditor, e.g., "ABC Traders".
Under Group, select Sundry Debtors or Sundry Creditors as appropriate.
In the ledger creation screen, enable Maintain balances bill-by-bill and set Credit Period (e.g., 30 days).
Save the ledger by pressing Ctrl+A.
Step 3: Set Credit Limits
Go to Gateway of Tally > Accounts Info > Ledgers.
Select Alter for the specific debtor or creditor ledger, e.g., "ABC Traders".
Under Credit Limit, enter the maximum allowable credit amount, e.g., ₹500,000.
Press Ctrl+A to save the credit limit.
Step 4: Record Transactions
Once credit limits are set, any transaction exceeding the defined limit will prompt a warning. For example:
Suppose the credit limit for "ABC Traders" is ₹500,000.
If an invoice is created for ₹600,000, Tally Prime will display a warning message indicating the credit limit has been exceeded.
You can choose to proceed or revise the transaction as needed.
Step 5: View Credit Limit Reports
Tally Prime provides reports to monitor credit limits:
Go to Gateway of Tally > Display More Reports.
Select Statements of Accounts > Outstanding.
Choose Ledger-wise or Group-wise to view outstanding balances.
Compare these balances with the set credit limits to identify overdue or over-limit accounts.
Example: Credit Limit for ABC Traders
Let us consider "ABC Traders" as a debtor:
Credit Limit: ₹500,000
Outstanding Balance: ₹450,000
New Invoice Amount: ₹100,000
When recording the new invoice, Tally Prime will warn that the total outstanding will exceed the credit limit by ₹50,000, enabling you to take corrective action.
Conclusion
Setting credit limits in Tally Prime is a proactive way to manage credit risk and ensure financial stability. By following the steps outlined in this guide, you can effectively control the credit extended to debtors and the credit availed from creditors, reducing the risk of defaults and improving cash flow management.