What is Company Credit Policy Document

Corporate Credit Policy 

Credit Policy Document:-

Credit Policy Document is an internal document which provides guidance for transacting business on credit terms with the customers. The document includes:

• Customer Eligibility criterion for credit dealings 
• Account quality policy (determining how much credit to grant) – rating mechanism to evaluate credit worthiness of a prospective customer 
• Terms of sale (Credit period to be allowed and factors to be considered, any cash discounts for early payment) 
• Standard terms of payment and modes of payment to be agreed with the customer 
• Collections policy (collections methods, frequency, sample request letters, phone calls) 
• Schedule of Authority for approving the credit limit, credit period, invoking credit hold and revoking credit holds etc.
  

Credit Restricting Event:-

This refers to an event, on occurrence of which credit sale is restricted to the customer. Such an event occurs when:

• Credit limit for a particular customer is exhausted; or 
• Balance in respect of a particular invoice is outstanding beyond the credit period allowed.