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Bad Debt Policy

The Customer Debt Collection Policy outlines procedures for collecting late payments from customers to ensure that debts are accurately reported and uncollectable debts are written off according to guidelines. It details steps for contacting customers, including reminders and final notices, and specifies actions to be taken if debts remain unpaid after specified periods. The policy also includes provisions for writing off debts over one year old, requiring CEO approval for such actions.

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54 views2 pages

Bad Debt Policy

The Customer Debt Collection Policy outlines procedures for collecting late payments from customers to ensure that debts are accurately reported and uncollectable debts are written off according to guidelines. It details steps for contacting customers, including reminders and final notices, and specifies actions to be taken if debts remain unpaid after specified periods. The policy also includes provisions for writing off debts over one year old, requiring CEO approval for such actions.

Uploaded by

abhishek
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

Customer Debt Collection Policy

Purpose of the Policy


This policy provides guidelines for the collection of late payments from customers.

The objective of the Bad Debt policy is to promote sales of the company and
simultaneously to ensure that:

 To ensure that the debtors disclosed in the annual financial statements are stated
at amounts that are deemed to be collectable; and

 To ensure that uncollectable debt is written off within guidelines of applicable


policies and legislation.

Procedures
An aging debtor report or customer outstanding payments report to be send every
week by Finance team to VP (F&A) along with CEO. All overdue customer payments
are to be noted and the following procedures undertaken until recovery of
outstanding amounts.

 First Contact: Once the payment is overdue, we need to follow up over


phone or email the customer. Remind them that payment is due and has not
been received. Ask them when they will be paying you and keep a record of
the conversation or email. Remember to be nice, they may have forgotten or
paid into the wrong bank account.

 Overdue reminder: If they do not respond to the phone call or email, try
contacting someone else in the business. Let them know who you are trying
to contact. This often results in a return response from either the person you
were trying to contact or someone else from the business. Make a note of all
conversation details on the overdue customer payment record.

 Final notice: When a payment is overdue for more than 180 days a final
notice is to be sent either by phone or email. A record of this notice must be
entered onto the overdue customer payment record

 Direct contact: Where there has been no response to the final notice within
180 days then Business Head must either visit the customer or phone where
previous contact has been by email. The purpose of this step is to secure a
date of payment. A record of this notice must be entered onto the overdue
customer payment record.

 Formal letter of demand: Where payment remains outstanding for more


than 360 days and there has been an unsatisfactory response from the
customer, authorisation from CEO for the formal letter of demand to be issued
must be obtained. Once authorised this letter is to be sent via registered mail
and a record of this notice must be entered onto the overdue customer
payment record.

Write off debt: If debts are over one year old with no payment plans in place, they
shall be bad debts. After all avenues to collect the debt have been exhausted
approval may be sought to write off a bad debt. Finance shall refer all bad debts over
1 year old to the CEO. All approved write offs shall be recorded in the nominated
accounts under the Finance Department and no further sales are to be undertaken
with that customer without approval. If a debt is written off and a client seeks further
service provided at a future date, the written off debt shall be reinstated and the client
shall be required to pay the debt prior to the provision of further services.

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