Question

Why do you think credit policy is important?

Answer 1

A good credit policy is as important to a company as its sales and customer service teams. A strong credit policy allows for all other parts of the company to operate in a more broad manner because it opens up new avenues of revenue which were not there prior to credit being allowed.

Credit policies are not designed to be restrictive, necessarily, they are put in place to provide structure, and create efficiency in the credit department.

The ability to extend credit to a customer is not given, its earned by the credit worthiness of that particular customer. The credit policy is in place because the company is taking a risk when it extends work or materials to a project or client. Credit policy is in place to help mitigate the risk, formalize procedures for determining acceptable risk, and set up procedures for dealing with the credit relationship.