Credit and Finance Policies Written by Kaizen Enterprises Pty Ltd
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When developing strategies to improve your business’ cash flow, it is essential to document your Accounts Receivable procedures and put in place appropriate policies for the credit and finance functions.

This documentation not only forms the basis for training new staff, but will also help your Accounts Receivable staff to operate the receivables functions according to your business’ goals and objectives.  It is the map. In addition to a Credit Application form itself, the three key documents which you should create are a Credit Policy, a Returns Policy and a Role/Job Descriptions document for all people involved in the accounts receivables process.

Credit Policy

The Credit Policy covers the entire range of issues affecting the credit that your business extends to its customers. A good Credit Policy will help to reduce money being owed outside your terms. It will also help your employees understand how to extend appropriate credit and stop access to credit for customers who breach payment terms, while showing the way for collection activity.

Your credit policy must be to the point and generally exclude unnecessary details. It should focus on a range of key issues affecting credit, such as procedures, authority limits, credit limits, and a process flow mapping the credit extended and the control of it to final collection or recovery action.

Returns Policy

The Returns Policy should clarify your company’s process for dealing with returns and resolving post-sale disputes. A good Returns Policy will provide your customers with clear instructions for returning goods, and help your employees to quickly and efficiently achieve satisfactory resolution.

Your Returns Policy should include a clearly written, simple process for returns, and incorporate details such as timelines for resolving disputes and the authority levels required to approve common actions, such as replacement of faulty or incorrectly shipped stock.

Job Descriptions

Effective job descriptions are essential for every person involved in the accounts receivable process. It is only possible to properly train staff and achieve corporate objectives if everyone involved in the credit and finance process fully understands their role and their part in this key area of operations.

Job descriptions should summarise each role’s objectives and then examine every goal in detail, with reference to stakeholders’ requirements and the objective measurements which will be used to assess performance. Where appropriate, you should set Key Performance Indicators that can be used to quickly measure accomplishments, and provide references to useful tools that may be helpful for the employee.