Credit Policy for businesses and how to extend credit and manage credit risk

• A credit policy has certain objectives, I have listed some of them here so you can see what the goal of having a Credit Policy could be: 
• To provide timely notification to customers regarding past due amounts, and therefore eliminating old balances from being carried on the receivables.

• To outline a procedure that will provide customers with options when they cannot pay in full and on time.

• To provide a procedure on when and what to do with small balances on customers accounts.

• To provide a procedure that will enable a company to adequately provide reasonable credit limits for customers with revolving credit.

• To provide guidelines to legally collect money due your company that was lost due to bad checks.

• To have a system that will maintain timely contact with customers when they are past due.

• To provide a procedure that will enable your company to keep credit card numbers on file for customers and automatically charge them when they place an order.

• To have a procedure that will enable your company to be aware of when an account should be placed for collection and to avoid carrying bad debts on the receivables.

• To provide a procedure that will enable your business to legally charge customers credit cards at the time they place an order.

• To provide a procedure that will eliminate orders being held, and to better serve customers in a timely manner.

• To have a procedure that will enable your business to be aware of when to write a balance off to bad debt.