Template
Credit policy
The framework for who is granted credit, how much — and what actually happens when the money does not arrive.
- Owned by
- The finance function
- Only works
- If it is enforced
When to use it
Use it when the losses are no longer accidents, but a pattern. A credit policy moves the decision to grant credit away from the salesperson on the phone, and the escalation away from whoever happens to have time. It is not a document you write in order to have one — it is what decides whether anything at all happens on day 40.
It has to be right
The wording is rarely the problem. It is the deadline, the fee and what the letter leaves out — and the mistake costs you the expenses, not the debtor.
- Set the limits in amounts, not in wording. "Assessed individually" is not a policy
- State explicitly who may deviate from it — and that the deviation must be documented
- Attach a CONSEQUENCE to every bucket in the aged debtors report
- Decide in advance when a case is handed over. Otherwise it never will be
The fields that go wrong
Most placeholders are trivial. These are not.
- Point 3 — the credit limits
- Set amounts, not opinions. 'Assessed individually' is not a policy. And the limit must be hard in the system — if a salesperson can override it without approval, it does not exist.
- Point 5 — the escalation ladder
- The most important page in the document. Without a fixed day for when a case is handed over, it never is.
- Point 6 — the targets
- Set figures you actually follow up on. A credit policy without a monthly review of the aged debtors report is a statement of intent.
Frequently asked questions
Who should own the credit policy?
The finance function — not sales. If it is owned by the people it is meant to constrain, it will not be enforced.
What is the most important point?
The escalation. Limits and assessments are easy to agree on. What moves DSO is that the reminder actually goes out on the due date, and that the case actually is handed over on day 40 — every time, without a discussion.
Next step
Terms of trade with an interest clauseThe policy says who is granted credit. The terms say what you may charge when they do not pay.Legal disclaimer. The template is generic and free to use. It is not legal advice and does not take account of the circumstances of your particular case. Rates, deadlines and statutory references change — check them before you use the document. If the claim is large, disputed or heading for court, call us before you send anything.