indiIndiana Jones & the Credit Trilogy

Part 2

The Temple of D.O.O.M.

By Robbie Burch


“You’re gonna get killed chasing your damn fortune and glory!”

Indiana Jones:
“Maybe, but not today.”


In Part 1 of our Credit Trilogy  we discussed the A.R.C. The Assembling of Credit Information, reviewing the information that has been assembled, and making healthy conclusions based on what has been reviewed. In Part 2 we are going to discuss the specifics of credit approval procedures. Like the roller coaster through the coal mines, credit can turn into a sickening experience of unpredictable highs and lows, or it can be an exciting adventure with risks that are rewarded with Fortune and Glory. We’ve constructed 4 keys to successful credit approval procedures to help you avoid DOOM!

Determine what your credit department’s policies will be before deciding how much risk is involved with a specific customer. A solid credit policy is a summary of your company’s credit philosophy. It should explain the purpose of credit policies in a way that even non-credit professionals can understand. Your credit policy should be geared toward an understanding that sales are vital to the growth and profitability of your business. A strong credit policy will be geared toward extending credit to all applicants who fall within appropriate risk parameters. Your credit policy will contain the details of the requirements listed in Part 1 of our trilogy regarding the appraisal of verified information that will help to determine each customers ability and willingness to pay according to YOUR credit terms.

Operate your credit department with the intention of creating a better understanding between your sales department and your accounting department. The objective of your credit department is to ensure profitability by finding a suitable credit basis upon which to do business with a customer. No customer shall be denied the opportunity to purchase product until every means of selling to that customer on a reasonable basis has been exhausted. Have the sales department know what to look for in a potential customer regarding their ability to pay. This is helpful in establishing quality clientele. Have your credit department be able to build broad and durable customer relationships with clear credit policies. This is helpful in creating profits which can endure over time regardless of setbacks or issues with non-payment.

Optimize profits with specific explanations of your company’s Terms of Sale. Explain any prompt payment discounts offered and, if your company offers several different terms of sale, explain the circumstances under which each is offered. Late payment service charges on all past due invoices should be stipulated here. You need not always bill late charges, but if they are included in your credit agreement signed by the customer, you could then apply them to delinquent accounts depending on need, e.g., accounts sent for third party collections. Check with state usury laws before establishing late charges in your policies to ensure that they can be enforced.

Maintain your relationships with your customers through periodic reviews of their credit lines and through correspondence detailing what the customer can expect or take advantage of. Your credit department should conduct annual reviews of customer credit lines to identify potential problems and to determine which customers’ credit lines can be increased. Again, maintaining a healthy relationship between sales and credit allows for the sales department to be notified of any credit line increases which can, in turn, increase sales. Copies of form letters should also accompany your credit policy. Common credit letters include letters of acceptance regarding lines of credit, refusal of credit, periodic review of credit, discounts, and letters encouraging customers to take advantage of lines of credit if they have not been active. Keeping correspondence with your customers ensures that the credit process is being established even after the initial line of credit is approved.

Establishing a healthy credit policy with a strong philosophy can keep the roller coaster that is business one that is fun, adventurous, and profitable. Use risk to your advantage and remember, you can chase your fortune and glory and still avoid DOOM!

Let PICB help to manage your risk with our credit resources, collections, and Credit Risk Assessments (CRA).

Call us today at 847-265-0400 or look us up online at