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Policies and procedures for credit and collections management should be clearly documented and communicated.

Credit Assessment The credit worthiness of all new credit customers should be evaluated and documented for approvals in the credit assessment forms. Credit limits of customers must be approved in accordance with the DOA. The credit assessments should include at least two of the following: - Analysis of customers latest available financial statements or credit rating agencys reviews - Understanding customers management and business - Personal guarantee - Site visit Credit ratings of one to six should be specified for each customer based on the credit assessments. Customer credit terms and limits should be granted based on the credit ratings. Overrides to the credit rules should be approved in accordance with the authority levels. Credit assessments for all major customers should be updated annually.

No delivery order should be generated by the system if the relevant customers had trade debts exceeding either their credit terms or credit limits. Overrides require pre-approval from both the Divisional Director and Finance Manager before the orders can be processed.

Sales, Invoicing and Recording Price and volume discounts should be approved in accordance with the authority levels. Sales orders should be evaluated to ensure compliance with approved credit limits. Outstanding sales orders should be monitored daily for their progress and status. All Delivery Orders should be matched with Invoices and Customers Purchase Orders. All Credit Notes should be supported and approved in accordance with the authority levels. There should be sequential control over all Invoices, Credit Notes, Delivery Orders and Goods Returned Notes. Collections and Bad debts

Monthly debtors ageing reports showing old debts beyond credit period should be generated for monthly credit review.

Follow up actions for long outstanding debts should be established and documented during credit review meetings. Follow-up actions should include sending of reminder/warning letters and, ultimately legal letters as a last resort.

All debtors write-off should be approved by both the Group MD or Group FD in accordance with the DOA.

Customer statements should be mailed monthly to customers. Disputes must be investigated and resolved within two weeks and monitored by Functional Manager independent of sales function.

Credit Notes Issue

Credit notes should be approved by Functional Managers independent of sales function. Credit notes are sequentially controlled.


Debtors ageing report should be reconciled to the GL monthly and reviewed by Finance Manager.

Segregation of Duties

There should be segregation of duties between the following functions:

- Credit control - Credit notes - Collections - Accounts receivable Delegation of Authority (DOA)

The documented DOA should cover the authority to:

- New credit customers - Credit limits and terms, and overrides to the credit rule - Sales orders - Bad debt provision and write-off - Credit note issues