Purpose of the policy
This policy is to make sure a customer doesn’t get too far into debt with you without a payment plan being put into place or work stopped.
Procedures
Reports on customer credit must be run every month.
When a credit limit is breached all relevant staff will be notified. This includes CEO, CFO, Sales, Distribution, Accounts Collection.
Any current outstanding orders should be stopped until the breach in the credit limit has been rectified. All staff working on the order or sale for the customer should not carry out further work until authorised by CEO.
Review outstanding orders and sale history
If the customer has a large number of orders outstanding or has increased the volume of orders since the last credit review, then a review of the credit limit must be undertaken.
This is the responsibility of the CFO.
If the credit limit needs to be increased, this must be approved by the CEO. Once this has been approved, all staff working on outstanding orders must be notified to restart the customer’s orders.
Credit limit is breached due to outstanding payments
CFO must make a list of all outstanding payments.
CFO must ring the customer and explain that further orders cannot be processed until the account has been paid.
If the customer is having difficulty, make a schedule of payments to bring them back in line with their credit limit.
Get the signoff of CEO before discussing this option with the customer.
Use the following script to assist with the call:
“Hi John, how are you? Just thought I would give you a ring about your outstanding orders. Unfortunately, we have noticed that payments for previous sales have fallen behind on your account and these will need to be paid for before we can process the next set of orders. Are you able to fix this up today so we can continue on your order?”
If they cannot pay on the day of the phone call, then get an expected payment date from them and confirm that any outstanding orders cannot start until the payment is made.
Review payment terms for the customer
If the customer has increased the volume or value of orders since the last credit review, the payment terms must also be reviewed by CFO.
Where large orders are being placed then the payment terms should include deposit on order and/or progressive payments for each order. This must be discussed and agreed with the CFO.
All customer payment terms must be cleared within 7 days on invoice.
Where a customer has requested longer payment terms than the policy, this should be referred to and authorised by CEO.
All customer payments are to be reviewed at least once a quarter to ensure that payment terms are adhered to. For payments made outside of the agreed terms CFO will prepare a report that details the reasons why payment terms have not been adhered to.
This report will be reviewed and authorised by CEO.