Credit Policy Review

Credit Policy Review

We review your current policies and help you create sound credit policies that will keep your cash flow healthy and your client relationships on good terms.

The credit policy for your business is unique, based upon a consideration of several factors including but not limited to: risk, industry standards, plan for growth, economic environment, and cash flow requirements. More specifically, the policy must be linked to risk (of non-payment) and your company’s business plan for growth. Consider the cash your business needs to sustain and grow when anticipating write-offs. Take into account increased risk in a down economy.

The policy must establish steps necessary to evaluate credit worthiness of potential “customers”.

Term guidelines are established by rating risk of repayment using pre-selected criteria which include dollars of sale, credit score of customer, customer’s clients, character and reputation. Consider industry standards when granting credit.

Regardless of whether clients sold on terms or payment upfront, maintain a credit file using documents which were created for your business. The file should include: credit application, personal guaranty, purchase orders, contract of sale, change orders and delivery tickets.

The policy should be in the form of a written credit manual. Reference to the credit manual should be made by the entire company (including the sales department). The policy should be communicated to your customers before, during and after the sale process.

The manual should also specify billing policies and procedures and address the internal collection process based upon age of receivable and amount. Reference should be made to use of external collection resources within a short period to maximize the likelihood of recovery.

A credit policy is a document that must be modified. A constant evaluation of receivables is necessary to identify necessary changes to the policy to protect your bottom line.

Video on Credit Policy:


For questions on establishing or modifying a credit policy, credit manual or credit documents for your business, contact us by email or call (212) 686-0100.

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