Credit Policy Sample
A credit policy sample is an example or template of a credit policy that companies can use as a reference when creating their own credit policies. Such a sample might include various sections, each covering a different aspect of credit management.
Here’s a simplified example of what a credit policy sample might look like:
Company Name: XYZ Corp.
1. Objective: The objective of this credit policy is to establish guidelines for granting and managing credit to customers, with the aim of maximizing sales and minimizing risk of non-payment.
2. Credit Assessment: Customers requesting credit must complete a credit application form. We will assess their creditworthiness based on credit history, financial stability, and trade references. A minimum credit score may be required.
3. Credit Terms: Standard credit terms are Net 30 days. We may offer a discount for early payment or charge interest on late payments, as specified in our payment terms.
4. Credit Limits: Each customer will be assigned a credit limit, based on their creditworthiness and our relationship with them. This limit may be reviewed and adjusted periodically.
5. Order Approval: Orders from new customers or orders that exceed a customer’s credit limit must be approved by the Credit Manager.
6. Collection Procedures: We will follow up on overdue accounts promptly and professionally. Accounts that remain unpaid for more than 60 days may be referred to a collection agency.
7. Credit Policy Review: This policy will be reviewed annually to ensure it remains aligned with our business objectives and market conditions.
Remember, this is a simplified example. A comprehensive credit policy might include more detailed procedures, specific roles and responsibilities, criteria for escalating issues, and other elements relevant to the company’s operations and industry.
Example of a Credit Policy Sample
Let’s create a sample credit policy for a hypothetical company called “GardenSupplies Co.”, which sells gardening equipment to both businesses and individual customers.
GardenSupplies Co. Credit Policy
1. Objective: The primary objective of our credit policy is to drive sales growth while managing credit risk effectively.
2. Credit Assessment Process: To apply for credit, customers must complete a detailed credit application form. We assess creditworthiness using credit scores, trade references, and the customer’s financial statements (for business customers). For individual customers, we may require a minimum credit score of 700. For business customers, we take into account both the credit score and the financial health of the company.
3. Credit Terms: Our standard credit terms are Net 30 days from the invoice date. However, we offer a 2% discount if the invoice is paid within 10 days (2/10, Net 30). Late payments may attract an interest charge of 1.5% per month on the outstanding balance.
4. Credit Limits: New customers will have a maximum credit limit of $2,000. This can be increased based on the customer’s payment history and financial health. The Credit Manager must approve any credit limit increase.
5. Order Approval: Orders exceeding a customer’s credit limit must be approved by the Credit Manager.
6. Collection Procedures: If a customer’s account becomes 45 days overdue, our accounts receivable department will contact the customer to request payment. Accounts that are 60 days or more overdue will be referred to a third-party collection agency.
7. Policy Review: This credit policy will be reviewed annually by the Finance team to ensure it aligns with our business strategy and market conditions. Any changes to the policy must be approved by the Chief Financial Officer.
Remember, this is just an example. A real credit policy would be tailored to the specific needs and risks of the business, and it may need to comply with industry regulations and standards.