It is common practice for businesses to sell products and services to customers on credit.

When a product or service is sold on credit, the business is, in effect, lending money to the customer.

Money itself has a cost. When selling on credit, calculate the cash impact on the business. Expenses still need to be met while the business is waiting for customers to pay.

Different industries have different credit practices and methods of setting and applying credit terms. Consider the industry norm before setting credit policies for your business.

Developing and implementing a formal credit application process to assess the credit-worthiness of each customer is recommended. Customer credit references are a vitally important element of Credit Policy.

It is wise to clearly document credit terms so that staff and customers understand the impact of delayed payments. Printing Credit Terms on customer collateral such as Terms and Conditions, invoices and sales proposals is common practice.

Consider applying penalties for late payment and offering a discount for early payment.