Keela Helstrom reports:
"A credit policy is a must for all businesses that provide [their] customers with services and merchandise on credit. A good policy outlines the procedures for evaluating a customer's creditworthiness, for extending credit to customers that are most likely to pay their bills on time and for establishing purchasing limits based on a customer's credit history and ability to pay. When adhered to by all employees, a credit policy helps minimize a company's risk of not receiving the cash from a sale made on credit...Explain the purpose of the credit policy at the beginning of the manual. State the overall responsibilities of the credit department, including the duty to assess customer creditworthiness and minimize the potential loss resulting from extending credit to customers. Include the duties, responsibilities and authority of each member of the credit department and give employee names and contact information...Include the payment credit terms the company will extend to its customers -- the number of days from the invoice date until the cash payment is due. Express the credit terms as a number...Outline the company's credit application and approval procedure. Clearly state how customers are to apply for credit and the documents and references they should provide with the application. Indicate the employees responsible for reviewing customer applications and the process used for evaluating a customer's creditworthiness and specific credit limits...Specify the corporation's procedures to collect on its outstanding customer invoices. Clearly state the specific collection action that is taken in relation to how many days a customer's invoice is past due. For example, a company may choose to mail a delinquent letter to a customer with an invoice 15 days past the due date but make a courtesy call to a customer with an invoice that's 30 days past due. For more delinquent accounts, a late payment arrangement may be established, a collection agency may be employed to collect the debt or legal action may be taken."
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