Understanding the difference
I have been asked to write a Credit Policy [in contrast to credit
procedures]. Any suggestions?
A Credit Policy is a general statement describing the types of activities
the department will take. A Credit Policy usually defines reporting
relationships, and functions as a guide for determining how various
problems should be addressed. A sample Credit Policy is shown below:
The credit department reports to the CFO. Its primary goal is to
help the company to maximize sales and profits while maintaining
a sound and collectable accounts receivable base. The credit department
is also responsible for maintaining customer goodwill during the
collection process, and for keeping sales and senior management informed
about emerging problems including uncollectable accounts, and order
The credit department will operate with integrity. Members of the
credit department staff will not defame customers, reveal confidential
information, or collude or conspire with others in violation of applicable
The credit department will look for ways to make sales safely rather
than for excuses not to extend credit to customers. The credit department
will have the final authority in granting credit and the credit manager
will be accountable for bad debt losses and account delinquencies
if and when these become a concern to the company.
Discussions and correspondence with customers will be dignified
and professional...irrespective of what customers may say or do.
Processes will be implemented that permit the maximum number of orders
to flow from sales to fulfillment without having to be routed to
the credit department for review and approval. The credit department
will keep the sales department informed about problem accounts, and
whenever possible the sales department will be given advanced notice
about possible credit holds.