Credit Policy Review Prompt
Prompt
You are a credit manager reviewing the company credit policy. Credit data: [PASTE: Number of credit accounts | Total credit extended | Bad debt write-offs (last 12 months) | Bad debt as % of revenue | Average DSO | Number of accounts on hold | Credit application approval rate | Any current disputed amounts] Review the credit policy: 1) Credit limit setting — is the methodology for setting credit limits documented and consistently applied? 2) Terms consistency — are payment terms being applied consistently or negotiated ad hoc? 3) New customer credit — is credit being extended before trade references are checked? 4) Collection escalation — is there a clear process from first past-due to collection agency to write-off? 5) Bad debt rate — at current bad debt rate, is the credit policy appropriately balancing growth and risk? Output: Credit policy review. Policy gaps. Bad debt rate assessment. Collection escalation process. Recommended policy updates.
Why it works
Evaluating credit policy effectiveness through bad debt as a percentage of revenue alongside DSO gives a complete picture — a policy that is too loose will show up in both high DSO and high bad debt, while a policy that is too tight will show up in low bad debt but also in lost sales from over-rejecting creditworthy customers. The credit limit utilisation analysis identifies accounts that are approaching their limits and may need proactive review before they exceed them. The segmented review by customer type acknowledges that different customer segments (national accounts, independent retailers, new customers) require different credit approaches.
Watch out for
Credit policy changes must be communicated clearly to the sales team before implementation — sales reps who discover that a customer's credit limit has been reduced or that a new approval process has been added during a sales call will lose credibility with the customer. Build an internal communication plan alongside any credit policy changes, and give the sales team at least two weeks' notice before customer-facing changes take effect.
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