Credit Policy Template
A written credit policy turns ad-hoc, emotional credit decisions into a consistent, defensible process — this template gives you the structure to fill in for your own business.
What's included
- A complete credit policy structure ready to populate
- Approval authority and limit tiers
- Standard terms and exception handling
- Overdue escalation and stop-credit triggers
7 min read
Why put it in writing
When credit decisions live in one person's head they are inconsistent, hard to defend and impossible to scale. A written policy states who can approve credit, on what evidence, and what happens when an account falls behind. Everyone applies the same rules and your exposure stays inside limits you actually chose.
Keep it short — one to three pages is plenty for an SME. The template below is a skeleton; fill each section with your own numbers and names.
The credit policy template
CREDIT POLICY — [Business name] Version: ____ Effective: ____ Owner: ____ 1. Purpose To set consistent rules for granting and managing customer credit. 2. Who may approve credit Up to $______ : __________ (role) $______ to $______ : __________ (role) Above $______ : __________ (role) Non-standard terms: __________ (role) 3. Information required before credit is granted - Signed credit application - Legal entity confirmed (ABN/ACN) - Two trade references checked - Credit check above $______ - Guarantee above $______ 4. Standard terms Payment: ______ days from invoice Interest on overdue: ______ % Approved exceptions: __________ 5. Limits Every account has a recorded limit. Reviewed: [ ] quarterly [ ] annually 6. Overdue follow-up Day __: reminder Day __: phone call / second notice Day __: account placed on stop Day __: referred for external recovery 7. Stop-credit triggers - Over limit - Over ______ days past due - Dishonoured payment - Adverse credit information 8. Review This policy is reviewed annually and after any bad debt over $______.
How to use it
Populate every blank with your real numbers, names and roles, then circulate it to everyone who touches sales or accounts. Build the limits and approval tiers into your invoicing workflow so a sale cannot proceed past a limit without sign-off. Pair it with your stop credit decision checklist so the escalation triggers actually fire.
When an account passes the external-recovery trigger, act promptly rather than letting it age — refer the debt on a commission-only basis with no upfront fee.
This is general business information, not legal advice. Have any contractual elements reviewed by a lawyer.
Tips
- Tie approval authority to dollar limits so nobody guesses what they can sign off.
- Write the overdue escalation timeline down — escalation that depends on 'getting around to it' does not happen.
- Keep the policy short enough that your team actually reads it.
- Review annually and after any significant bad debt to see what slipped through.
FAQ
How long should a credit policy be?
One to three pages for most SMEs. It is a working tool, not a manual — brevity is what gets it used.
Who should own the policy?
Whoever approves credit — often the owner in a small business, or the credit controller as the business grows.
How do I make sure the policy is followed?
Build the limits and approval steps into your order and invoicing workflow so the system enforces them, not just goodwill.
Templates are a head start — not legal advice
Customise to your business and have important documents reviewed. Need to recover a debt? We can help.