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Credit Policy Review Comes Once a Year, According to NACM Survey

Revising a company's credit policy is typically an annual event, according to NACM's January monthly survey.

When asked how often their company updates or revises its credit policy, 38% of respondents answered "annually," while 20% said "less than once a year." Only 5% of participants noted either "quarterly" or "every six months," while only 1% said that revisions were made every month. Fourteen percent of respondents either never revised their company's policy or simply didn't have one.

The remaining 22% of participants noted that their company updates their credit policy according to some other schedule not offered as an answer. Most of these respondents noted that their company merely makes changes when necessary, sometimes yearly, sometimes daily and sometimes not at all.

"We change policies like the wind blows. It is impossible to keep our credit policy manual up to date," said one participant, who said their department was "always trying new things...at the whim of management," which has generated mixed results. "So far so good, but in this economy it would be better to have some consistency," they added. "It is very frustrating for A/R and to our customers. No one knows what to expect next."

Consistency and customer service were, perhaps surprisingly, common reasons not to revise or update a company's credit policy. "We tried to update them once several years ago," said one respondent. "We got so many angry calls from customers that we decided not to do a mass update again."

Despite these concerns, the majority of participants noted that an up-to-date credit policy was extremely beneficial, no matter how frequently the revisions are made. "Laws and internal procedures change quickly and without reviewing and/or updating the policy semi-annually we have employees performing critical functions in credit, extending credit and the collection process, without the benefit of being current on the changing laws and procedures," said one respondent. "The job of credit management is challenging enough without expecting the employee to operate without a sound and updated credit policy."

Credit professionals looking to develop or improve their company's credit policy should check out "Developing Your Credit Policy," a session at this year's Credit Congress led by Ron Sereika, CCE. To learn more about Credit Congress, or to take advantage of a Groundhog Day-only savings deal on registration, click here.

Jacob Barron, CICP, NACM staff writer