Credit policy
Written rules for granting credit: who qualifies, how limits and terms are set, who can approve exceptions and when accounts are escalated.
A credit policy turns judgment calls into consistent decisions. It typically covers credit applications, risk scoring, limits, payment terms, holds, collections escalation and write-off approvals.
It's also a control. Auditors look for one, and it gives sales and finance a shared reference when a large deal needs non-standard terms.
Further reading
Related terms
- Credit limitThe maximum outstanding balance a business lets a customer carry before new orders are held or reviewed.
- Credit holdA block on new orders or shipments for a customer who's over their credit limit or seriously past due, until the balance is paid or the order is approved.
- Payment terms (Net 30)The agreed conditions for paying an invoice. Net 30, for example, means the full amount is due 30 days after the invoice date.
- Write-offRemoving an invoice balance from accounts receivable because it won't be collected, charging it to bad debt expense or the allowance for doubtful accounts.