How To Create a Credit Policy and Past Due Collection Procedure

How To Create a Credit Policy and Past Due Collection Procedure

To ensure a successful transaction from start to finish, each department in your company should have a playbook to outline the basics. The department responsible for payment collection – whether it’s called billing, invoicing, collection or, most often, accounts receivable – is no exception. 

Providing this direction to your employees is essential. A policy manual outlines the official positions of the company. Offer clarity to staff by explaining what each team member is expected to do (or not do) when extending credit and pursuing unpaid bills. These guidelines can also prepare customers for what to expect from sale to payment.

The document most businesses use for collecting accounts receivable is called a credit and collection policy. The guidelines are typically broken into two sections: a credit policy and a past due collection procedure. This framework can be as detailed or as broad as is necessary for your office.

What Is a Policy And Procedure Document?

A policies and procedures intended for accounts receivable management are no different than those for the rest of your business. The documents should make up part of a larger internal system. Your company’s policy and procedure guide should cover all areas of your business and provide a blueprint for how the organization is expected to operate.

Employees should have access to any sections that apply to them at all times. This availability will cut down on the amount of time managers spend rehashing policies. It will also empower employees to become more self-sufficient and educated on how the company is intended to run.

Components Of a Credit Policy And Past Due Collection Procedure


Any company that offers goods and services without immediate payment is a creditor. This includes healthcare providers, law offices, among others. As part of a credit policy, you must decide the guidelines you intend to follow in regards to offering credit to consumers. To get started, be sure your policy answers the following questions:

  • Who does your company extend credit to?
  • What are the criteria for extending credit?
  • Are there any exclusions to this policy? For example, do you only serve certain states or regions?
  • Who within your organization is authorized to grant credit to customers?


The other half of this system should center on billing, payments and past due collection procedures. For this part of the document, you may want to include: 

  • The different positions within the AR billing department, and the responsibilities of each position. 
  • Payment expectations to be communicated to the consumer. 
    • When to expect a bill
    • How long the consumer has to pay
    • The collection process if a consumer does not pay on time
  • Whether your company sends accounts to a third party for further collection after 90 days past due.
      How To Create a Credit Policy and Past Due Collection Procedure

      What Can a Credit Policy And Past Due Collection Accomplish?

      Creating comprehensive policies and procedures for your organization will have lasting benefits. The project shouldn’t be treated just as training material for employees to set aside once they understand the basics. If created and maintained with care, your internal manuals can boost efficiency, revenue and customer satisfaction.

          Staff impact

          Your employees are the face of your company. They are the ones who interact with consumers and carry out the actions that reflect your business. Especially during the collection of late payments, it’s important your staff takes action that keeps your company’s image in a positive light. An established policy also helps: 

          • Protect your organization from possible missteps caused by an employee simply guessing what is expected of them
          • Streamlines training, education refreshers, and policy updates, as everyone should have access to the same information at all times. 
          • Provides a framework for company culture by establishing official company expectations.

              Customer relations impact

              Customers are the reason you stay in business. A credit policy and past due collection procedures should make the billing, invoicing and payment process as easy as possible for them. If this is the case, more customers will make their payments on time, increasing your bottom line. 

              A strong, well-communicated policy and procedure document will also ensure your office recovers more late payments. Doing this work upfront will yield big results later by reducing (or even eliminating) the need to use a third party for collection.

              For more information on how you can increase past due collections in-house using text and email, download this comparison chart:

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              - ABOUT THE AUTHOR -
              Hannah Huerta - PDCflow Marketing Specialist
              Hannah Huerta, Marketing Specialist

              Hannah Huerta is a Marketing Specialist at PDCflow. She creates content for the accounts receivable and payment industry.

              LinkedIn - Hannah Huerta
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