Building a Client Credit Policy

Why writing it down matters

When credit decisions live in one person's head, they are inconsistent and impossible to scale. A keen salesperson approves terms the business cannot afford; a familiar customer gets the benefit of the doubt long past the warning signs. A written policy removes the emotion and states, plainly, who can approve credit, on what evidence, and what happens when an account falls behind.

For an adviser, helping a client draft this document is high-leverage work: it is a one-off effort that improves every future credit decision and gives the owner something concrete to point to when a customer pushes for terms they would rather not grant. It also gives new staff a reference instead of a guess.

The core sections

A workable client credit policy covers:

• who can approve credit, and up to what limit;
• the information required before credit is granted;
• standard payment terms and any approved exceptions;
• the follow-up cadence for overdue accounts;
• when an account is placed on stop or referred for recovery.

Resist the urge to over-engineer. One to three pages suits most SMEs; the aim is a tool the team uses weekly, not a manual that sits unread. The follow-up cadence section is worth particular attention, since it is where good intentions usually fail. Spell out who sends the first reminder and when, what the second and third contacts say, and the day an account goes on stop — so chasing happens by routine rather than mood. A policy that names dates and owners survives staff turnover and busy weeks; one written in generalities quietly lapses the first time everyone is flat out.

Limits and escalation triggers

Tie approval authority to dollar limits so nobody has to interrupt their day to ask whether they can approve an order. A junior might approve modest amounts on standard terms; anything larger, or any exception, escalates to the owner. Apply the same logic to overdue accounts — fix a point at which an account stops shipping, and another at which it is referred externally.

Escalation that is written down happens; escalation that depends on someone getting around to it does not. To help the client see what a slow account costs while it sits unescalated, model it with the Merion calculator suite during the drafting conversation.

Keeping it enforced

A policy only works if it is applied. Build the checks into the client's invoicing and order workflow so a sale cannot proceed past a limit without sign-off, and schedule a review at least annually and after any large bad debt to see what slipped through.

The external-referral trigger is the part owners most often hesitate over, so make it concrete: name the threshold and the partner in advance. Merion recovers overdue commercial debt on a commission-only basis with no upfront fee — see refer a debt for how that step works. This is general information, not legal advice.