Time to Update your Credit Policy!

Does your business have a credit policy?     When was it written?  Do you use it?

I have worked at companies that are using a credit policy from over 15 years ago.  with the changing economy it is imperative to your business that you update your credit policy to reflect how you are doing business now and make sure it is followed – otherwise you don’t need to have it.

Credit managers everywhere struggle with how to update an old credit policy.  Some tips to help you get started:

  1. Put aside an hour or two and pull out your credit policy.
  2. Make a list of things you want in a policy and check to see if they are included in your policy.
  3. Check for things that may be obsolete or something that is not being utilized and delete them out of there.
  4. An easy fix is to use my Credit Policy workbook and just fill in the blanks and you have a credit policy.

You want your policy to be clean, clear, easy to read and easy to enforce.

Look at what you do now when a new customer comes in, write down those steps you take to set up a new account.  This will be the start of your updated credit policy.  Remember, a credit policy does not have to be long and involved, it should be easy to do, easy to understand and easy to follow, otherwise it will be useless.

I base my information on my experience, education and personal experiences working and being involved with credit and collections.  I know businesses that have a 5 step credit policy – don’t let it scare you!

MORE About Michelle

In 1998, when Michelle was getting a divorce and had 2 small children, she started a collection agency from home leaving her full time job 6 months later.  Her agency did very well and grew over the next 8 years until Michelle sold it to write full time.  Michelle knew what business owners needed and had already written a couple of books that were selling well.  “But it was still a huge leap”, she says, “I was a single mom with two sons.”  I started putting together my ideas, set up a office in my home, and used the income from book sales to fund publishing more books.

That same year Michelle self published 4 books and e-books before landing her first book contract with Entrepreneur Press to write The Ultimate Credit and Collections Handbook, the check IS in the mail.  She then self published a couple more business books before getting a book deal with John Wiley & Sons Publishing for her first hardcover book, The Guide to Getting Paid, weed out bad paying customers, collect on past due balances, and avoid bad debt.   She is currently writing a book to be released in 2013 by Cambridge Scholars Publishing.

Today Michelle Dunn continues to write columns and books about how business owners can limit credit risk in this economy as well as learn how they can prevent bad debt, and collect from past due customers.  Many of her books are now available as paperback and e-books, including The Credit Policy Workbook.

 

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5 Responses to Time to Update your Credit Policy!

  1. Sheri | says:

    I am looking for some help on creating a credit policy as the company I work for doesn’t currently have one, also with creating a new credit application,and I would like to get set up with Equifax. I work in the agriculture buisness so it is a little tougher for collections when they you have to wait for them to get paid.

  2. Michelle Dunn says:

    Sheri,
    that is such great news – so many businesses think they can make it without a credit policy! There are a couple of books I have written that have specific examples of credit policies in them – you might want to take a look at them, or write your own using them as an example. In my newest book “The Guide to Getting Paid, weed out bad paying customers, collect on past due balances, and avoid bad debt” I have examples of a couple of credit policies as well as instructions for writing your own. I also have more information on credit policies in an older book called “The Ultimate Credit & Collections Handbook, the check IS in the mail”. In regards to credit applications, you can print them off from my website free at http://www.michelledunn.com/free-from-michelle or order some from your printer where you get your business cards and letterhead or from an office supply store.

  3. Tara Thornton says:

    Hi, I am in the infancy stages of starting a collection agency. I have so many questions but I will take this one step at a time. I live and will operate my business in Phila.,Pa. I know that some states require additional licenses to collect accounts in their state. 1) Were can I go to get the most updated information on the states that dont require any additional licenses. 2) How do I handle licensing and permits at the local level or is collection agency regulated at the state level alone. I understand completely that all collection agencies must abide by the FDCPA. I am currently reading two of your books “How to start a collection agency” and “Squeaky Wheel”. I plan to utilize as many of the resouces that you mentioned throughout the books as well. So thankful for this website.
    Sunshine

  4. Lynn says:

    My contract states that if they don’t pay I can charge them 5% penalty a week, $10 per telephone call and $25 per in person collection attempt. Is this legal in the state of Washington? I heard that you can’t charge a penalty that it has to state you will charge interest is this true?

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