Credit Policy 101: Your Blueprint for Getting Paid on Time

Published on 28^th February 2025

Introduction

In the construction industry, late payments aren’t just an inconvenience—they can throw your cash flow off track, delay projects, and put your business at financial risk. Yet, many firms still operate without a clear credit policy, exposing themselves to bad debts and unreliable payers.

A well-structured credit policy is your best defense against late payments. It sets clear expectations, protects your revenue, and ensures you get paid on time. So, what should your credit policy include, and how do you make it work for your business? Let’s break it down.

Why Your Business Needs a Credit Policy

A credit policy isn’t just for large corporations. Whether you’re a small subcontractor or a major supplier, having a clear policy helps you:

Reduce bad debt risk – Define who qualifies for credit and on what terms.
Improve cash flow – Faster payments mean smoother operations and fewer cash shortages.
Avoid awkward disputes – Clear policies prevent misunderstandings and payment delays.
Make informed credit decisions – Know when to extend credit and when to require upfront payment.

Without a structured credit policy, you risk working with unreliable customers who may delay or refuse payments altogether.

5 Essentials of a Strong Credit Policy

1. Define Who Qualifies for Credit

Not every customer should be given credit terms. Your policy should outline who qualifies based on:

• Credit reports & financial health
• Real-time trading experiences with suppliers
• Business history & reputation in the industry

Pro Tip: Don’t rely solely on credit scores. A business with an average score may still have a habit of paying late. Check real-time payment trends to see if they pay suppliers on time.

2. Set Clear Credit Limits

Once you determine a customer is eligible for credit, establish:

• The credit limit you’re willing to extend
• Payment terms (e.g., 30 days, 60 days)
• Penalties for late payments

Avoid vague wording like “Payment due upon receipt.” Instead, be specific:
“Invoices must be paid within 30 days of issue. Late payments will incur a 5% monthly fee.”

3. Establish a Clear Payment Process

Your credit policy should outline how customers should make payments, including:

• Accepted payment methods (bank transfer, direct debit, etc.)
• Invoice format & frequency
• Contact details for billing inquiries

Pro Tip: Businesses that invoice promptly and systematically are more likely to get paid on time. Automate your invoicing process instead of manually chasing payments.

4. Have a Defined Collections Process

No one likes chasing unpaid invoices, but having a structured follow-up process prevents small issues from becoming major cash flow problems. Your policy should include:

• When reminders are sent (e.g., 7 days before due date, on due date, 7 days overdue)
• Actions taken at each stage (friendly reminder → formal notice → debt recovery)
• The point at which external debt recovery services step in

Pro Tip: The sooner you escalate overdue accounts, the higher your chances of recovering the full amount. Don’t wait months before taking action.

5. Communicate & Enforce Your Policy

A credit policy only works if:

It’s communicated upfront – Include it in contracts & onboarding documents.
Your team enforces it consistently – Sales and accounts teams should follow the same rules.
No exceptions are made – Allowing “one-time” rule breaks sets a risky precedent.

Pro Tip: Use credit application forms to document agreements and obtain a signed acknowledgment from clients. This strengthens your legal position if disputes arise later.

How to Get Started with Your Credit Policy

If you don’t have a formal credit policy yet, now is the time to put one in place. Here’s how to start:

Step 1: Review your current payment processes—where are the biggest delays?
Step 2: Identify your ideal client profile and set clear credit eligibility criteria.
Step 3: Draft clear credit terms and document your payment & collections process.
Step 4: Make it official—include your policy in contracts & onboarding documents.
Step 5: Monitor, adjust, and enforce it consistently.

Struggling with Late Payments? We Can Help.

At Top Service, we’ve been helping construction businesses manage credit risk and recover unpaid invoices for over 30 years.

Real-time trading experiences to identify high-risk customers before they become a problem.
Industry-specific credit reports for smarter decisions.
Debt recovery services to help you get paid—fast.

Need help setting up a strong credit policy? Get in touch today.
Book a Free Consultation

Final Thoughts

A well-crafted credit policy is more than just a document—it’s a powerful tool that keeps you in control of your cash flow. It’s not just about getting paid; it’s about building a sustainable business with less risk and fewer payment headaches.

By taking a proactive approach to credit control, you can eliminate financial stress and focus on growing your business.