Credit Policy

Company Letterhead

{{company_name}}

{{company_address}}

Phone: {{phone}}

Email: {{email}}

Website: {{website}}

1. Introduction and Purpose

This Credit Policy ("the Policy") establishes the framework for extending credit to customers of {{company_name}}. The purpose of this Policy is to define clear guidelines for credit assessment, approval, and management, thereby minimizing credit risk, optimizing cash flow, and supporting sustainable business growth. All employees involved in the credit process are expected to adhere strictly to the provisions of this Policy.

2. Scope

This Policy applies to all credit sales and extended payment terms offered by {{company_name}} to its customers, including new and existing clients. It covers all aspects of the credit cycle, from initial application to collection and bad debt management.

3. Credit Application and Assessment

3.1. All new customers requesting credit facilities must complete a formal Credit Application Form (Appendix A).

3.2. The Credit Application Form must include, but is not limited to, the applicant's full legal name, business registration number, physical address, contact details, trade references, and financial statements (for credit requests exceeding {{credit_threshold_amount}}).

3.3. A credit assessment will be conducted by the Finance Department, considering factors such as: trade references, credit bureau reports, financial stability, payment history (for existing clients), and industry risk.

3.4. Credit limits will be assigned based on the assessment outcome and reviewed periodically, but at least annually.

4. Credit Terms and Limits

4.1. Standard credit terms are {{payment_terms_days}} days from the date of invoice, unless otherwise agreed in writing.

4.2. All credit limits, once approved, will be communicated in writing to the customer.

4.3. Any requests for credit limit increases must undergo a re-assessment process as outlined in Section 3.

5. Invoicing and Collections

5.1. Invoices will be issued promptly upon delivery of goods or completion of services.

5.2. Payment reminders will be issued {{reminder_days_before_due}} days before the due date and again on the due date.

5.3. Overdue accounts will be subject to a formal collection process, which may include: phone calls, emails, dunning letters (Appendix B), and ultimately, engagement with a third-party collection agency or legal action. Interest at a rate of {{interest_rate_percent}}% per annum will be charged on overdue accounts.

6. Bad Debt Management and Write-offs

6.1. Accounts deemed uncollectible after all reasonable collection efforts have been exhausted will be classified as bad debt.

6.2. Bad debts exceeding {{write_off_threshold_amount}} require approval from the {{approving_authority}} for write-off.

6.3. All bad debts will be recorded in accordance with {{accounting_standards}}.

7. Policy Review and Amendments

This Policy will be reviewed annually by the Finance Department and the Board of Directors to ensure its continued relevance and effectiveness. Any amendments to this Policy must be approved by the Board of Directors and communicated to all relevant employees.

Signature Block

_____________________________

Signature

Name: {{approver_name}}

Title: {{approver_title}}

Date: {{date}}