Finance Credit Policy & Procedure Manual

Introduction and Objectives

Welcome to [Your Company Name]'s Finance Credit Policy & Procedure Manual. This document serves as a guiding framework for managing and extending credit within our organization. Our primary objectives are to ensure consistent, fair, and legally compliant credit practices, optimize financial stability, and minimize credit risk. Through this manual, we aim to provide clear guidelines for credit assessment, approval, and monitoring, supporting our commitment to maintaining robust financial health and fostering trustworthy customer relationships.

Credit Approval Authority

In this section, we define the hierarchy and authority levels for credit approval within [Your Company Name]. Our structured approach assigns specific credit approval limits to various positions, ensuring a clear, transparent, and controlled process. This hierarchal system enhances decision-making efficiency, supports risk management, and maintains integrity in our credit operations. The following table outlines the approval limits corresponding to each designated role, aligning with our organizational standards and risk appetite.

Position/Role	Credit Approval Authority Limit
Senior Credit Officer	Approval for credit limits up to $500,000
Credit Manager	Approval for credit limits up to $250,000
Assistant Credit Manager	Approval for credit limits up to $100,000
Credit Analyst	Approval for credit limits up to $50,000

Credit Assessment and Approval Process

This section delineates our systematic approach to assessing and approving customer credit. Employing a range of tools, including credit scoring models and financial analysis, we ensure an equitable, transparent, and rigorous evaluation process. Our objective is to maintain consistency, eliminate bias, and uphold our high standards of financial prudence.

The Credit Assessment and Approval Process

Outlined below is a process that ensures thorough assessment and equitable decision-making in our credit approval process:

1. Application Review

2. Credit Scoring

3. Financial Analysis

4. Risk Assessment

5. Approval or Denial Decision

6. Communication

Credit Limits

At [Your Company Name], we have established a systematic approach to setting credit limits, which plays a pivotal role in managing financial risk and fostering healthy customer relationships. Our credit limit policy is designed to balance the needs of the business with the creditworthiness of each customer. By assessing various factors such as payment history, financial stability, and credit score, we determine an appropriate credit limit that aligns with both the customer's needs and our risk management strategies.

These limits are regularly reviewed and adjusted based on ongoing credit evaluations, market conditions, and changes in customer financial status. This dynamic approach ensures that we maintain a balance between supporting our customers' growth and safeguarding our company's financial interests. It's a crucial component of our credit management system, ensuring that we extend credit responsibly and sustainably.

Terms of Credit

This section outlines the standard terms of credit offered by [Your Company Name], ensuring clarity and consistency in our transactions. We establish these terms to manage our financial risks effectively while accommodating the needs of our diverse clientele. The following table specifies our standard credit terms, including payment durations and associated conditions.

Payment Term	Description	Conditions
Net 30 Days	Payment due in full within 30 days of invoice date	Applied to most customers with established creditworthiness
Net 45 Days	Payment due in full within 45 days of invoice date	Extended to customers with long-term relationships and excellent credit history
Cash on Delivery	Payment required at the time of product or service delivery	Used for new customers or those with limited credit history

Risk Management and Monitoring

Risk management and monitoring are integral parts of [Your Company Name]'s credit policy, essential for sustaining financial health and credit quality. Our approach focuses on identifying, assessing, and mitigating the risks associated with extending credit. By conducting regular credit reviews, we ensure ongoing vigilance in tracking and managing credit risk. This process includes assessing changes in customer financial conditions, industry trends, and economic factors that may impact creditworthiness.

We also emphasize the identification and management of high-risk accounts. Through early detection and proactive measures, we aim to minimize potential losses. This includes setting up alerts for significant changes in credit scores or payment patterns, and implementing tailored strategies for accounts showing signs of distress. These procedures help us maintain a healthy credit portfolio and protect the company from undue credit risks, reflecting our commitment to robust financial management and responsible lending practices.

Collection Procedures

Effective collection procedures are crucial for [Your Company Name] to maintain financial stability and mitigate credit risk. This section details our structured approach for collecting overdue accounts. Our process is designed to be firm yet fair, ensuring that we recover debts while maintaining positive customer relationships.

Collection Process Steps

1. Initial Reminder

2. Follow-up Communication

3. Formal Notice

4. Negotiation of Payment Plan

5. Referral to Collection Agency

Legal and Compliance

Ensuring legal compliance in our credit operations is a cornerstone of [Your Company Name]'s commitment to ethical and responsible business practices. This section outlines the legal requirements and our adherence strategies, particularly focusing on compliance with the Fair Credit Reporting Act (FCRA) and other relevant regulations.

• Fair Credit Reporting Act Compliance: Outlines our practices to comply with FCRA, including obtaining proper consumer consent for credit reports, providing accurate information to credit bureaus, and procedures for handling disputes about credit information.

• Anti-Discrimination Policies: Details our adherence to the Equal Credit Opportunity Act (ECOA), ensuring that credit decisions are made without regard to race, color, religion, national origin, sex, marital status, age, or receipt of public assistance.

• Data Privacy and Security: Describes our measures to protect customer data, aligning with regulations like the Gramm-Leach-Bliley Act (GLBA) for financial privacy and information sharing.

• Record Keeping and Reporting: Details our practices for maintaining accurate records and reporting as required by law, ensuring transparency and accountability in our credit operations.

• Compliance Training and Auditing: Highlights our ongoing training programs for staff on legal compliance and the regular auditing procedures to ensure adherence to these laws and regulations.

Documentation and Record Keeping

In our credit operations at [Your Company Name], meticulous documentation and record-keeping are essential for ensuring transparency, compliance, and effective credit management. We maintain comprehensive records of all credit transactions, agreements, and communications with clients. This includes documenting credit applications, approval documents, risk assessments, and payment histories. These records are critical for audit trails, dispute resolutions, and regulatory compliance.

Our record-keeping system is designed for both security and accessibility. We ensure that all documents are stored securely, with controlled access to protect client confidentiality and data integrity. Regular audits and updates are conducted to ensure our record-keeping practices remain up-to-date and compliant with evolving legal and industry standards. This diligent approach to documentation and record-keeping supports our commitment to operational excellence and customer trust.

Review and Modification of Credit Policy

Recognizing the ever-changing landscape of the market and the evolution of our business, [Your Company Name] commits to the regular review and timely modification of our credit policy. This ongoing process ensures our policies remain relevant and effective. We evaluate market trends, economic conditions, regulatory changes, and our business performance to inform any policy adjustments. The criteria for modifications are transparent and aimed at maintaining our competitiveness, financial stability, and adherence to regulatory requirements. This adaptability is key to our proactive credit management approach.

Date of Next Revision: [Month, Day, Year]