Create and Manage your Credit Policy

This is our last segment on Creating a Credit Policy, after which we move on  to the actual credit application.   We hope that our perspective as debt collection attorneys has been helpful in aiding you in the creation of your business credit policy.

8.  Employees that work with customers/clients need to fully understand the credit policy.

The last thing you need is mixed messages and a breakdown of expectations.  Employee training on your credit policy is a must, both to use your credit policy to tactical advantage growing the business, and to minimize the probability of an account going to collections due to misrepresentation of your credit terms.


9. Decide “in advance” what penalties and late fees will look like.

Credit terms are the carrot that drives the business, penalties late fees, interest are the stick that drive conformance to your credit terms.  Your business has a very real expense in the management of past due business credit, and you should have a systematic, and clearly defined way of ensuring that you are compensated/reimbursed.


10.  Are you going to reward Early Payment?

The cost of capital is real, and good behavior from clients and customers is often rewarded.   Decide early, are you going to reward those that pay early with favorable terms?   One often used method is 2/10 net 30, meaning an upfront discount of 2% if paid in 10 days, otherwise payment is due in 30.   A caution needs to be put in place however.   Oftentimes, clients will take the early discount, regardless of whether or not they are on time, and you might find yourself expending effort to recover the discount, or forgiving it in the interest of the relationship with your client.


11.  Early Payment Rewards?   Make it known.

This gets back to “negotiate”  if you have a payment policy that rewards your customers, make sure it is known, and that this is treated like a tool you use to build that customer relationship.



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