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The credit policy is a vital document for almost any company, but particularly one out of the construction industry that is credit-heavy. Your organization should lay out its clearly philosophy on expanding terms to customers and gathering on overdue reports. If thereвЂ™s no plan, thereвЂ™s no a cure for success.
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What is a Credit Policy?
Basically, a credit policy is a couple of recommendations that sets credit and re re re re payment terms for clients and establishes a course that is clear of for belated re re re payments.
A good policy will generally do four things:
- Determine which clients are extended credit and billed
- Set the re re payment terms for parties to who credit is extended
- Determine the restrictions become set in credit that is outstanding
- Outline the actions or procedures utilized to manage delinquent reports
When it is broken on to its component components, it establishes exactly how danger averse an organization is vis-a-vis extensions of credit as well as other financial policies with regards to records receivable.
Numerous companies rarely extend credit, and need payment straight away upon purchase. A credit policy is a low priority, and for good reason for this type of business. There wasnвЂ™t any visibility from expanding credit if the continuing company is maybe maybe maybe not within the training of expanding credit to start with.
A sound credit policy should be an integral part of the companyвЂ™s business plan, monetary policy, and overall risk-management strategy for most other business, especially those involved in the construction industry.