Credit Policy - defining credit terms
A Credit Policy defines the standard credit terms that you offer to customers. New customers should be sent a copy and asked to sign and return the document as evidence that they are aware of, and accept your trading terms.
The document should contain the following information and have space for a representative of the customer to sign:
Your Standard Trading Terms
The Policy should explicitly state your trading terms and should include the following.
- Your credit terms e.g. payment is due within 60 days from the date of this invoice.
- A statement that you reserve the right to charge interest on overdue balances (all businesses are legally entitled to do this) e.g. we reserve the right to charge interest at 8% above Bank of England base rate on overdue balances. The interest must be calculated on a daily basis from the invoice due date.
- Whether you offer discounts for prompt payments or bulk purchases.
- Whether additional costs are payable (e.g. VAT or carriage costs).
Your Payment Information
- List the types of payment you are willing to accept.
- Identify the contact details of the member of staff who deals with monies owed (Accounts Receivable).
Customer Information
- Full details of who owns and who runs their business.
- The full name and address of their business (and whether it trades under a different name).
- Their registration number (if a limited company).
- How much credit they're requesting.
- Who their main company contact is for payment queries and how best to get in touch with them.
- Where to send invoices (if different from the delivery address).
- The name and address of their bank, together with their sort code and account number.
- Details of at least two trade references, which should be regular suppliers.
- Request for consent to obtain a bank reference and trade references.