Developing a Credit Policy Statement
Simply put, you must have a written credit policy that management buys into, that salesmen understand, that the credit department supports.
Why?
Some customers and contracts are not worth pursuing. They are black holes where the profit margin is razor thin and the contract terms are too difficult to meet.
Consider that the real purpose of any corporate employee is to create profits for the shareholders. Harsh but true.
A credit policy should set out the following:
- Credit limits
- Terms of sale
- The need for collateral
- When to cut off the customer’s credit
This should be your bible and must exist in writing.
A well written credit policy is the foundation of all credit decisions.
- It keeps the company focused on your core business
- Helps spot customers and projects that are too risky
- States whether your company is young and trying to gain market share
- Middle-aged and maintaining market share
- Mature and fending off the competition
Levy – von Beck has assisted many clients in the development of a written, meaningful credit policy, of gathering support at the corporate level for buying into the policy, and of helping sales staff get behind the program.
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