Have your customers been paying invoices later and later?

When was the last time you reviewed your credit policy?

Bad debt doesn't appear out of nowhere. In most cases, it's the predictable result of a credit policy that has a few holes. With over 50% of B2B invoices now paid late and write-offs persisting across industries, the difference between a healthy receivables portfolio and a growing problem often comes down to the policies you have in place before an invoice ever goes out.

Below are five of the most common credit policy mistakes we see, along with practical fixes that can protect your bottom line.

1. No Formal Credit Application Process

The mistake: Extending credit based on a handshake, a referral, or a quick online search. Without a standardized application, you're flying blind on the customer's financial health, payment history, and legal standing.

The fix: Require a complete credit application from every new customer, including trade references, bank information, and a signed personal guarantee where appropriate. Make it a non-negotiable step before any goods or services are delivered on credit.

2. Failing to Review Credit Limits Regularly

The mistake: Setting a credit limit once and never revisiting it. A customer who was a solid risk two years ago may be struggling today, and your old limit could be exposing you to far more than you realize.

The fix: Schedule periodic credit reviews — quarterly for high-volume accounts, annually for everyone else. Tie limit adjustments to payment behavior, aging trends, and any new financial data you can gather. A living limit is a safe limit.

3. Ignoring Red Flags in Payment Patterns

The mistake: Treating every late payment as an isolated incident. Slow pays, partial payments, and repeated excuses are often early warning signs of deeper trouble — but many companies don't flag them until it's too late.

The fix: Build triggers into your AR system. If an account goes 30 days past due twice in six months, escalate it for review. Train your team to spot patterns, not just individual events.

4. No Segmentation of Customer Risk

The mistake: Treating all customers the same. A startup with six months in business and a Fortune 500 subsidiary don't belong on the same terms, but many companies offer net-30 across the board.

The fix: Segment your customer base by risk level. High-risk accounts get shorter terms, smaller limits, and more frequent check-ins. Low-risk accounts can enjoy more favorable terms. Your credit policy should flex based on data, not instinct.

5. Overlooking Personal Guarantees and UCC Filings

The mistake: Extending credit to small businesses or LLCs without a personal guarantee or a UCC-1 filing. If the business folds, you're left as an unsecured creditor with little recourse.

The fix: For closely held businesses, require a personal guarantee from the principals. For larger credit exposures, file a UCC-1 financing statement to perfect your security interest. It's a simple step that can make the difference between recovery and write-off.

Get Guidance from a Debt Collection Agency

Our B2B debt collection agency works with businesses of all sizes to design, audit, and implement credit policies that reduce risk and support growth. Whether you need a full policy overhaul or a targeted review of your current processes, we're here to help.

Contact us today to learn how we can help you turn your credit policy into something that works FOR you instead of AGAINST you.