Credit and Terms Policy Kit

If credit limits and payment terms are undefined, every customer becomes a one-off negotiation. That creates inconsistent terms, delayed payments, and AR chaos.

This kit installs a simple standard: default terms, credit tiers, and a visible exception workflow so Finance can protect cash without blocking business.

---

What you will produce

1. A standard credit and terms policy
2. A credit and terms exception workflow
3. A customer onboarding checklist that prevents billing problems
4. Credit hold and release guidance
5. A monthly review cadence for exceptions and risk

---

Beginner-safe definitions

Credit limit: the maximum open balance allowed before additional approval is required.

Payment terms: the expected timeline for payment (for example net 30).

Exception: any deviation from the standard policy.

Credit hold: a stop on new work or shipments until a payment issue is resolved.

---

Minimum viable implementation

If you do nothing else, implement these two rules:

• Default terms and default credit limit tiers exist and are documented.
• Exceptions require approval and are logged, with owner, reason, and expiration date.

---

Step-by-step implementation

Step 1: Set standard payment terms

Pick default terms that align to cash goals and customer reality.

Beginner-safe starting point:

• One default term for most customers
• One exception tier for strategic deals

Avoid having five different defaults.

---

Step 2: Set credit tiers

Use simple tiers so the policy can be applied consistently.

Example tier model:

• New customers: conservative credit limit until payment history exists
• Standard customers: normal credit limit tied to typical monthly spend
• Strategic customers: higher credit limit with explicit executive approval

---

Step 3: Define the exception workflow

An exception is not a verbal agreement. It must be visible and owned.

Required fields:

• requested terms and credit limit
• reason for exception
• approver and approval date
• expiration date for the exception
• plan to reduce risk (deposit, milestones, partial prepay, smaller shipment sizes)

---

Step 4: Install onboarding controls

Many DSO problems start before the first invoice.

Minimum onboarding requirements:

• correct billing contact and email
• remittance email and payment portal details
• purchase order or contract on file if required
• tax forms if applicable
• customer acknowledgment of terms

---

Step 5: Credit hold and escalation rules

Credit holds should be predictable. If credit holds are random, Sales will bypass them.

Beginner-safe rules:

• Define aging triggers for hold consideration
• Define who approves hold and who can release it
• Track each hold decision with a reason

---

Templates

A) Credit and terms policy (copy and paste)

Copyable template (TEXT)
Copy
Credit and Terms Policy

Owner:
Effective date:

Standard payment terms:
- Default terms: Net __ days
- Early pay discount (optional): __
- Late fee policy (optional): __

Credit limits by tier:
- New customers: $__
- Standard customers: $__
- Strategic customers: $__

Exceptions (must be logged and approved):
- Any terms longer than Net __ require Finance approval
- Any credit limit above $__ requires Executive approval
- Any exception must include an expiration date and a risk mitigation plan

Required before invoicing:
- Signed contract or approved order
- Purchase order on file if required
- Billing contact name and email
- Remittance email and payment instructions
- Tax documentation if required

Review cadence:
- Monthly review of exceptions and credit holds
- Quarterly review of standard terms and tiers

B) Credit and terms exception request (copy and paste)

Copyable template (TEXT)
Copy
Credit and Terms Exception Request

Requester:
Customer:
Requested terms:
Requested credit limit:
Reason for exception:
Risk mitigation plan (deposit, milestones, prepay, or limits):
Expiration date:
Approver:
Decision date:
Notes:

C) Customer onboarding checklist (copy and paste)

Copyable template (TEXT)
Copy
Customer Onboarding Checklist

- Billing contact name and email confirmed
- Remittance email confirmed
- Payment method confirmed (ACH, check, portal)
- Contract or purchase order on file
- Tax forms collected if required
- Terms communicated and acknowledged
- Credit tier assigned
- Exception logged if applicable

D) Credit hold notice (copy and paste)

Copyable template (TEXT)
Copy
Subject: Account status update

Hi [Name],

We need your help resolving past-due invoices on the account.

Current status:
- Past-due balance: $[amount]
- Oldest invoice date: [date]

Next step:
Please confirm a payment date for the open invoices. If payment cannot be made by [date], we will review account status for a temporary hold until the balance is resolved.

Thank you,
[Name]

---

KPIs to track

• Percent of deals with exceptions
• Time to approve or reject exceptions
• Past-due balance trend by customer tier
• DSO by tier (new vs standard vs strategic)
• Credit holds issued and resolved per month

---

Common failure modes

• Terms are negotiated in email and never logged
• Exceptions do not expire and become permanent
• Billing contact details are missing at onboarding
• Credit holds are inconsistent and therefore ignored
• The policy exists but is not enforced