Common Mistakes in Credit Policies, Part 1

Have your customers been paying invoices later and later?

When was the last time you reviewed your credit policy?

Bad debt doesn't appear out of nowhere. In most cases, it's the predictable result of a credit policy that has a few holes. Here are two mistakes we often see in a company’s credit policy:

No Formal Credit Application Process

The mistake: Extending credit based on a handshake, a referral, or a quick online search. Without a standardized application, you're flying blind on the customer's financial health, payment history, and legal standing.

The fix: Require a complete credit application from every new customer, including trade references, bank information, and a signed personal guarantee where appropriate. Make it a non-negotiable step before any goods or services are delivered on credit.

Failing to Review Credit Limits Regularly

The mistake: Setting a credit limit once and never revisiting it. A customer who was a solid risk two years ago may be struggling today, and your old limit could be exposing you to far more than you realize.

The fix: Schedule periodic credit reviews — quarterly for high-volume accounts, annually for everyone else. Tie limit adjustments to payment behavior, aging trends, and any new financial data you can gather. A living limit is a safe limit.

Learn more in our latest article.

Get Guidance from a Debt Collection Agency

Our B2B debt collection agency works with businesses of all sizes to design, audit, and implement credit policies that reduce risk and support growth. Whether you need a full policy overhaul or a targeted review of your current processes, we're here to help.

Contact us today to learn how we can help you turn your credit policy into something that works FOR you instead of AGAINST you.