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This is a simple credit policy that should be good to get you started with one of your own.
For a credit policy to be effective, it must be designed to prevent bad debt losses, as well as to collect a large portion of the past-due balance each month. Among other things, a collection policy should provide guidance in the following areas:
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- The date when an invoice is considered past due. Some customers believe that the credit terms begin when [a] the invoice is received or [b] the product is accepted by the customer, whichever is later. This can be in direct conflict with your terms. Creditors normally calculate the due date based on the date of invoice, not on the delivery date or on any other basis. For creditors, it can be difficult to determine when the merchandise is received, or it is almost impossible to know when the customer received the invoice so the only certain date for the seller is the invoice date.
- The point at which a customer will be denied open account shipments because of a past-due balance. There are no hard and fast rules applicable to every company in this area. As a rule of thumb, once an undisputed balance is more than 30 days past due the credit department should give serious consideration to placing the account on hold if it is not on credit hold already.
- When and how the credit department will notify the salesperson or the customer of a decision to hold orders or a decision to withdraw open account terms. As a general rule, the salesperson should be notified before the customer because the first person the customer is likely to call after receiving this news is their salesperson. In fairness to the salesperson, the call from the customer should not come as a
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