What are the factors to consider when creating a collection policy and extending credit?

When creating a collection policy and extending credit, consider factors such as the creditworthiness of the customer, which involves assessing their credit history and financial stability. Additionally, establish clear terms regarding payment schedules, interest rates, and penalties for late payments to ensure transparency. It’s also essential to comply with relevant legal regulations and industry standards to protect both the business and the customer. Lastly, consider the potential impact on customer relationships and the overall cash flow of the business.