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How to Write a Credit Control Policy (With a Template Outline)

A credit policy decides in advance the arguments you would otherwise have with sales every month.

Short answer

A credit control policy sets out who gets credit and how much, your standard payment terms, the collection steps and their timing, when an account goes on hold, how disputes are handled, and who can approve credit limits and write-offs. Keep it to two or three pages, get sales and finance to sign it, and review it once a year.

Template outline

  1. Purpose and scope: which customers and entities it covers.
  2. Opening an account: information required, credit checks, references, and who approves.
  3. Credit limits: how limits are set, how often reviewed, and who can approve each level. The person who sets a limit should not be the salesperson who benefits from it.
  4. Payment terms: standard terms, who can agree longer terms, and early payment discounts if offered.
  5. Invoicing: invoices issued promptly, with purchase order numbers where the customer requires them.
  6. Collection timetable: reminder stages, calls and final notice, with days for each.
  7. Account holds: when supply stops, for example 30 days overdue or over the credit limit, and who can release a hold.
  8. Disputes: how they are logged, who resolves them and the target time.
  9. Escalation: late payment interest, collection agencies and legal action, and who decides.
  10. Bad debts and write-offs: approval levels, with a second approval above a threshold.
  11. Reporting: measures reviewed each month, such as DSO, overdue percentage and the largest overdue accounts.

Credit limits that mean something

Base limits on evidence: credit reference data, the customer's accounts, payment history and how much you would lose if they failed. Review limits for large customers at least annually and whenever their payment behaviour changes. A limit that is raised every time it is reached is not a limit.

Disputes: keep them out of the ageing

A disputed invoice is not a collection problem, it is a service or billing problem. Log it separately with an owner and a target date, and report disputed balances apart from overdue balances so the real collection picture is clear.

Make the policy stick

Have the sales director and finance director both sign the policy. When an account is put on hold, the policy is the reason, not the credit controller's opinion. For the day-to-day steps, see a credit control process that gets invoices paid on time and overdue invoice reminder email templates.

Checklist

  • Credit checks required before an account is opened
  • Credit limits approved by someone other than sales
  • Standard payment terms stated, with who can vary them
  • Collection timetable with days for each stage
  • Account hold rule and who can release it
  • Disputes logged and reported separately
  • Write-offs need a second approval above a threshold
  • Policy signed by sales and finance and reviewed yearly
UK and US

UK: if a contract sets no payment date, business payments are late after 30 days, and you can claim statutory interest and fixed recovery costs; state in the policy whether you will. US: terms such as net 30 apply only if agreed, and late charges depend on your contract and state law, so make sure your terms and conditions say what the policy relies on.

Free tool

DSO & Cash Calculator

Work out DSO and the cash tied up in late payers. Free to use online.

Use the DSO & Cash Calculator

Make it a control, not a one-off

The Credit Control & Receivables System calculates ageing, DSO, best-possible DSO and CEI from the ledger, shapes a bad debt provision to IFRS 9 / ASC 326 logic and requires independent approval for credit limits and write-offs. Excel, no macros, one-time price.

View the Credit Control & Receivables System

Common questions

Who should own the credit control policy?

Finance owns it, usually the finance director or financial controller, but sales should help write it and sign it, because they live with its consequences every day.

How long should the policy be?

Two or three pages. If it is longer, people will not read it. Put detailed procedures, such as reminder templates, in an appendix.

Should we offer early payment discounts?

Only if the cost is worth it. A 2% discount for paying 20 days early is an annualised rate of roughly 37%, which is expensive compared with most borrowing.

Sources

Related guides

Last updated 18 October 2026. General guidance for finance teams; check it against your own policies, systems and local rules.