Your credit policy should look different in 2023

A sound credit policy is essential –Over the past few decades, anincreasing number of companies have established formalized frameworks and processes for their credit policies, which is a positive development. Credit, payment terms, and debtor management are more important than ever. At Collectia, we believe that 2023 will be the year when companies without a strong credit policy will be hit hard.

An effective credit policy is crucial for businesses, especially in times of economic pressure, as it helps ensure that the business has the necessary liquidity to maintain its operations and survive in a difficult economic situation. Credit policy helps limit the company's financial risk by ensuring that it only issues credit to customers who have a history of paying back on time and that their ability to pay is assessed on a regular basis. This can help reduce the company's bad debt, which can have a negative impact on its financial health. It can also help maintain a good credit rating, which is crucial to the company's ability to access financing for future projects and investments. It can also have a positive impact on the company's reputation and make it easier to attract customers and business partners.

2023 looks set to be an exciting year – not just for the stock market, housing market, or interest rate market. We expect that more companies will feel the need to tighten their credit policies if they are to avoid increased losses on debtors and reduce the number of debt collection cases.

In this post, we focus on credit policy and why we believe it will look different in 2023. 

If your company already has a credit policy, you can find inspiration for updating it. If your company does not yet have a formal credit policy, this post can give you inspiration for developing one.

Credit policy – what is it?

‘Credit policy’ is basically what the term so aptly describes: a policy for managing your credit. It is a formal set of rules that determines how much credit the company wants to grant and to whom.

The credit policy can be the same for all customers, or it can be more advanced, with some customers having a higher credit limit than others. There are no fixed rules for what a credit policy should contain, and some companies have none, while others have several.

How do I get started with a credit policy?

We have previously discussed and written about the topic of "credit policy," as well as written a guide on how to start, develop, and optimize your credit policy. We strongly recommend that you read it.

Credit policy - how to design and apply an effective credit policy in your business

Why do we need to update our credit policy in 2023?

We recommend that credit policies be reviewed and optimized on an ongoing basis, and 2023 should be no exception. We expect 2023 to be a challenging year for many businesses and individuals; the economy is under pressure, inflation is affecting household finances, and more businesses and individuals are going bankrupt. This increases the pressure on your credit policy and, consequently, how you should view your customers.

The natural step is to tighten your credit policy in uncertain times. But it may also be time to utilize other tools in your credit policy rather than solely limiting credit amounts and credit periods. 

One example could be to implement a credit assessment tool that can segment your customers and provide recommendations on what credit policy each specific customer or customer segment should have.

Do you need help with your credit policy?

Collectia has extensive experience in the field of debt collection, credit information, and credit policies, with over 150 years of history. We have combined our expertise with modern technologies and data to provide our customers with the best solutions.

We also offer a free demonstration of our credit service, Qatchr, which allows you to effectively assess and segment your customers. By using Qatchr, you can minimize the risk of bad payers and thereby maintain a healthy economy in your company.