How to structure a Credit Policy in small companies?

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Selling more, with greater security and maintaining a balanced cash flow – these are needs inherent to all companies. But especially in small businesses, good financial health is crucial to keeping activities running.



One of the main steps is to define an efficient Credit Policy. It establishes which criteria will be used to understand the financial behavior of the clientele in detail. It also offers greater security when closing a deal, reducing financial risks and the chances of default.



Below, we explain how to build it, what the points to pay skype database to and how to improve credit granting in small businesses. Enjoy reading!





Rising default rates are still a concern


We are experiencing a time of economic recovery, after two years of pandemic and major impacts for both companies and consumers.



Among these effects, the increase in the default rate is the most noticeable. According to data from Boa Vista, the Default Record Indicator has already accumulated an increase of 12.4% this year, compared to the same period in 2021. Inflation and high interest rates are indicated as the main factors in the decrease in families' ability to pay.



And with so much uncertainty in the market, entrepreneurs are also increasingly concerned: how can they sell more and actually receive payment?





Why structure a Credit Policy in small companies?


The concept of working capital is related to financial transactions, that is, everything that needs to be settled and received. Therefore, it can be defined as the money your company needs to keep all activities running and to pay bills on time.



The balance of these cash inflows and outflows ensures the company's operation and success, especially in small businesses. After all, in many cases, the money invested comes out of the entrepreneur's own pocket. In addition, access to credit lines from banks and financial institutions can be more difficult.



A Credit Policy, therefore, will establish not only the criteria for granting credit in a sale on credit, but it will also be the basis for managing accounts receivable , as it prescribes how credit will be granted and subsequently collected, ensuring greater predictability about the amount available in the company's cash flow in a given period.





Read also: “ Discover 3 tips to increase your company’s working capital ”




What should I define in a Credit Policy?


To begin defining credit granting strategies for your company, it is important to understand what makes up the policy. We can mention: