Accounts Receivable Management: you don’t have a credit collections policy? You should.

accounts receivable managementDo you have a written credit policy to help you with Accounts Receivable Management? Many companies don’t. Some companies do not have a written policy because they feel it will be more trouble than it is worth in terms of keeping it up to date and feel that the policy will quickly be forgotten and not used- so why bother?

Yes, there is some time that needs to be spent with the document to ensure it is up to date and accurate and you need to make sure your credit professionals are utilizing the document. It may seem like a hassle at first but that is time and energy well spent when you consider the advantages of having a formal written policy in place. But write with care, there are some very important guidelines for writing an effective credit policy to ensure more effective Accounts Receivable Management.

Some of the advantages include:

• Reduce bias and subjectivity when credit decisions are being made
• Ensures continuity in the department
• Helps train new hires to the department on procedure
• It can be a great tool to help management and the credit department work toward the same goal and expectations.

How do you make sure your credit policy is effective? We have an entire white paper on the subject that you can download here, but in the meantime keep these things in mind when writing an effective credit collections policy:

• It must be relevant to the way your department actually operates
• It must be kept current
• It must be made public to the entire company
• Leave yourself room for decision making- do not make the rules too rigid
• Flexibility is good, but too much leads to confusion.
• Establish a specific hierarchy within the credit operation.
• Think of the entire organization, not just the credit department when writing.


For more information on how to develop a credit collections plan for your business download our white paper, “6 Steps to Developing a World Class Business Credit Policy & Collections Action Plan“ which outlines 6 steps you need to learn how to develop a credit policy and collections action plan that will help you collect on the money owed to you.

Accounts Receivable Management

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