General

• 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 agency’s 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 Customer’s 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.
  

Reconciliation

• 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

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