question

Minimum 2/0 cable for the 12/2000 Multi, 3/0 even better.

Also, fuse to inverter are not going to last at 200A. 300A would suit better, but you need the larger cable for the larger fuses.

@VanMan, it is not permitted to use the Victron Smart LFP batteries without a BMS; do you have one on the system that isn't shown? These are NOT "drop-in" batteries and a BMS is absolutely required as noted in Section 3.1 of the user manual.

I don't believe that's what's causing your cables to overheat, but it's a critical error that must be immediately corrected to prevent irreparable damage (not covered by warranty, I will add) to your components.

I do believe that what's causing your cabling to overheat is that it's undersized; as specified in Section 4.2 "Connection of Battery Cables" in the MultiPlus Compact user manual, 2/0 (70mm2) is the required cable gauge for connection of the MultiPlus Compact 12/2kVA to the battery bank. Undersized cabling causes increased resistance, which causes heat, which causes more resistance, which causes more heat, etc. etc.

Please thoroughly read, understand, and follow the requirements laid out in your user manuals, including the purchase and installation of a Victron BMS for your system, charge disconnects, load disconnects, and all other required components, as what you show here, as it stands, will fail sooner or later, possibly catastrophically, and will not be covered by warranty because the failure will be due to installation error.

If you are at all uncertain about the remaining components required to make your system safe, functional, and properly operational, please consult a reputable, experienced, Victron-trained systems installer to assist you in correcting your system, or reach out to an authorized Victron dealer or distributor for further assistance.