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Debt Management

Focus on

credit policy

It is often claimed that you only need to good reason. Get the rules right and next thing to think about is credit

do two things to succeed in business – exceptions will be few and far between. limits. Since granting credit is a costly
attract new business and get paid. I’dIn addition, time will be saved that can business, not least in administration

probably add two more – don’t sell too be devoted to attracting more good expenses start with ixing your lower
limit, typically in a range between $200
cheap and don’t break the law. However, quality business.
the irst two are undeniably essential. When an individual seeks investment and $2,000. You might decide that no

That being the case, it is surprisingadvice, the irst question usually is orders will be accepted below your
that so many companies do not have a “What level of risk are you willing to chosen amount or that they must be paid

written credit policy to help focus their accept?” Those willing to accept a higher cash. Alternatively, you may consider
efforts in these key areas.level of risk, have the potential to achieve that orders below said sum can always

There are three main reasons for this. substantial returns but risk signiicant be supplied on credit. Low value orders
The irst is that attracting new business losses too. A risk adverse approach will take up disproportionate amounts of

and getting paid are too often seen as be safer but has fewer prospects of high time and efforts, so the key here is to
separate activities. The smallest, “one- rewards. So, it is worth spending a bit of minimise your investment in them. At

man”, ship supplier may think attracting time thinking about the approach of your the other end of the spectrum, you may
company and expressing it at the start of also want to set a maximum limit, if
new business is today’s problem, so
getting paid has to wait. Large, multi- your credit policy.potentially very large orders would pose

national ship suppliers have different “We will only grant credit to signiicant risk to your company.
people, possibly on different continents, customers when we are 100% conident In the next issue of The Ship Supplier,

responsible for either new businessthey will pay in 30 days” and “We want we’ll look at who should take credit
or credit management. Second is the to supply every ship that calls to this decisions and what tools they need for

widely held fear that a written policyport and we will always grant credit to that task. u
will restrict sales and result in missed achieve this goal” are two examples.Roger Symes, Director, Marine Debt

opportunities. Finally, there’s the view You probably disagree with both of Management, London
that circumstances frequently change those extremes but can you express

and any policy will soon be out of date.your company’s policy in one or two
The aim of this article is to show sentences? It will make a great start to

that such concerns are groundless. No your credit policy.

one is willing to grant unlimited credit If you company is bigger than
to everyone who asks for it, so it makes one or two people, the

sense to deine your boundaries. That
way everyone in the company plays by

the same set of rules. Naturally, rules
can be broken from time to

time but not without

76 The SHIP Supplier 60th Anniversary Edition 1955-2015