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It's Time to Review Your Business Credit Policies

Published by Summit Marketing Team on 04 Jun 2021

 Are you looking for ways to improve your business profits? Though there are many different ways you can grow your profits, high on your list should be your credit policies. You should take the time to review your business credit policies on a regular basis, whether every 6 months or once a year. Even in a good economy, you should never let your guard down. Below is a list of tips to consider.

  1. Review the payment cycles that other successful businesses in your industry are using to see how your policies stack up. For example: If your payment cycle is on the 1st of the month, make sure your invoices arrive in a timely manner so your customers have sufficient time to process your payment.
    Review your business credit policies
  2. What is the cost of offering credit to your customers? For example: if your business generates $1,000 per day in credit sales, and it takes you an average of 60 days to collect, your cost of providing credit to your customers is $3,000 per year. This assumes you can borrow money at 5% interest. FYI: By changing the average collection to 30 days, you cut carrying costs by half.

  3. Establish collection policies and set up a schedule to follow up on delinquent accounts. The more overdue accounts become, the more likely they are to become non-collectible and cut into your profits.

  4. You can speed up collections by invoicing customers when you ship the goods. Make sure your invoice clearly explains your payment terms, including penalties for late payment and the discount, if any, for prompt payment.

  5. Don't be so eager to sign up new customers that you neglect to check out their credit history. Take the time to check references, and obtain a credit report to see how they've handled other financial transactions before you approve credit to new customers.

Having a good credit policy in place can make a huge difference in your profitability.


If you’re ready to get an edge on your competitors? At Summit CPA we offer multiple resources to assist and help your business grow. Contact our office at (866) 497-9761 to schedule an appointment with our advisors.

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