Creating a credit policy is a crucial step for any business in the construction industry. And, knowing exactly where to start when creating a credit policy from scratch can be a daunting task. Here's a great tool that can kickstart a credit policy: Credit Policy Sample from Levelset.
Every business' credit policy will be different, but the basics are the same
Now, that's just a helpful jumping-off point. Every construction business is different, and an extremely detailed policy might not always be required. Still, there are some principles that should come into play when creating a policy, which we discuss here: 10 Things to Consider When Writing A Credit Policy.
But, at it's heart, a credit policy is really just a combination of the following:
-creating credit goals,
-a gameplan for making decisions on creditors,
-a playbook for evaluating new customers' credit,
-plans for mitigating the risk of nonpayment and securing debt, and finally
-a set of guidelines that contemplate when certain recovery actions (like filing a mechanics lien, sending a debt to collections, or taking to the courts) will be taken.
I hope this has been helpful. Here are two additional resources that will be helpful in creating a policy that's right for your business:
(1) Credit Policy Basics(2) What Is a Credit Policy – And How Do I Make a Good One?