A small Guyanese supplier has two new customers. One wants G$300,000 of supplies each month and pays on delivery. The other offers twice as much business but wants 45 days to pay. Without a credit policy, the decision may be made by whoever receives the order, even though it commits the company’s cash for weeks.
A useful policy does not need to be bureaucratic. It needs to answer who may approve credit, what information they need, how much exposure the business will accept, and what happens when an invoice is not paid. The Australian government’s general guidance on payment terms illustrates why clear terms and follow-up matter; it is not Guyana law. The process below is a working model for editorial illustration, not a universal legal form or a substitute for contract advice.
Start with the cash you can actually spare
Begin with a rolling cash forecast and the cost of fulfilling a typical order. Suppose the supplier has G$1.2 million available after allowing for wages, rent and committed purchases. It expects to spend G$700,000 fulfilling the prospective customer’s first order. Giving an unlimited credit line would put the next payroll at risk even if the customer is sound. Management might instead approve one order, ask for a deposit, or cap outstanding invoices at an amount the business can carry.
Write down the maximum unpaid balance for each customer and the person authorised to change it. Exposure should include delivered but unbilled work and open orders, not only invoices already issued. If a customer is near the limit, the next order requires a conscious decision rather than an automatic sale.
Check the customer and choose a term
The policy should identify the business being billed, confirm the buyer has authority to order, and record the billing address, tax details and accounts-payable contact. For a material exposure, it may be appropriate to review trade references, previous payment history or financial information that the customer is willing to provide. A new business with no history is not necessarily a bad customer, but the evidence is different.
There is no single term that fits every customer. The choice might be payment in advance, a deposit with balance on delivery, or a specified number of days after a valid invoice. The record should state why the term and limit were chosen. A manager can then distinguish a deliberate exception from a term that drifted into practice.
The contract or purchase order should define the due-date trigger. For example: “Payment due 30 calendar days after the buyer receives a valid invoice following signed delivery.” That wording is an illustrative commercial arrangement, not model legal language. The parties should also agree on the documents required for a valid invoice and how discrepancies are handled. The companion Explainer, Credit Terms Explained: What “Net 30” Means for Cash and Risk, explains why those details change the effective waiting period.
Make the invoice easy to pay
An invoice should match the purchase order and delivery record. Before sending it, check the legal customer name, order reference, description, quantity, price, tax treatment, payment details and supporting evidence. Route it to the agreed destination and save proof of submission. If the buyer rejects it, record the reason and correct it quickly.
This is operational discipline, not clerical perfectionism. An invoice that sits in an employee’s inbox for a week or lacks a signed delivery note cannot be relied on in the cash forecast. The supplier should record the invoice date, acceptance date if applicable, contractual due date and expected payment date as separate fields.
Put collection on a calendar
For a hypothetical invoice accepted on 3 September under a 30-calendar-day term, the agreed due date would be 3 October. The supplier could send a courteous statement before that date, confirm receipt if no acknowledgement arrived, and contact accounts payable promptly if the date passes without payment. If an issue is raised, the collection record should show its owner, evidence needed and promised resolution date.
A simple escalation path might move from the accounts-payable contact to the buyer who ordered the goods, then to the supplier’s authorised manager. The timing and tone should fit the contract and relationship. There is little value in sending increasingly harsh reminders when the real obstacle is a missing purchase-order number. Equally, a persistent pattern of broken promises should prompt a review of further deliveries and the credit limit.
Keep an ageing report with the invoice amount, days overdue, dispute status and next action. Reconcile it with the cash forecast every week. The 13-week cash-flow Guide shows how a late receipt affects future balances. If a high-value invoice moves from this Friday to next month, the forecast needs to move with it.
Treat disputed invoices separately from silent non-payment. If the buyer says five of 100 items were damaged, identify the evidence and agree what amount remains undisputed. The supplier may be able to resolve the shortfall without allowing the whole invoice to stagnate, depending on the contract. If the dispute remains unresolved, escalate through the agreed commercial route and obtain advice before assuming that a collection letter alone settles it.
The policy should also say who can stop further credit. Sales staff may reasonably want to protect a customer relationship, while finance staff may see an exposure that threatens payroll. A pre-agreed decision rule avoids asking either team to improvise under pressure. The override, if one is granted, should be documented with a revised cash plan.
Review the decision, not only the debt
After the first few orders, compare the agreed term with actual payment behaviour. Did the customer routinely approve invoices late? Did disputes arise from the supplier’s paperwork or the customer’s process? Did the financing cost make the original margin too optimistic? A customer who pays reliably may justify a higher limit; a customer who repeatedly pays late may need shorter terms or a deposit.
The outcome of a good policy is not the elimination of all credit. It is an explicit choice about how much of the business’s money is committed, for how long and with what evidence. That gives a supplier room to grow while protecting the cash required to keep serving every customer.
