How to write a credit policy that is actually followed
A credit policy nobody knows is a document. One that is built into the system is a decision.
You have written rules for who gets credit, how much, and what happens when payment does not arrive — and those rules are followed.
Step by step
- 01
Decide who gets credit at all
Write the criteria down: legal form, age, accounts, payment history. New customers below a certain size pay in advance — that is not discourteous, it is a policy.
- 02
Set monetary limits, not gut feelings
How much may a single customer owe at any one time? What happens when the limit is reached — are deliveries stopped, or is payment in advance required? Write the answer down before the situation arises.
This is where it goes wrongA credit limit with no consequence is a recommendation. The policy has to say what HAPPENS when the limit is breached — otherwise it will be breached.
- 03
Fix the reminder cadence once and for all
When does the payment reminder go out, when do the first, second and third reminders go, and when does the notice of collection? The same cadence for every customer — otherwise you can neither forecast your liquidity nor document that you have treated people alike.
- 04
Decide when a case goes to debt collection
Set a day and an amount, not a mood. And decide who is allowed to make an exception — because the exceptions will come, and they have to stand up to someone other than the person granting them.
- 05
Put the policy into the system, not into a folder
A policy that depends on a person remembering it every Friday survives until the first busy week. Build the rules where the invoices and the reminders are actually sent from.
This is where it most often goes wrong
Not because anyone is careless, but because the mistakes are easy to make and only surface once it is too late.
The policy is written and never used
The classic: a handsome document nobody in the accounts department has ever seen. Test it by asking the person who sends the reminders what the limit is for customer X. If she cannot answer, the policy does not exist.
Sales is allowed to overrule it
One large order, one exception, and the policy is a recommendation. Write down who may grant a waiver — and that it has to be recorded in writing every single time.
You forget the escalation
Most credit policies stop at the third reminder. That is precisely where the most important decision sits: when do we let go, and who takes over.