Mitigating Risk Of Trade Credit – Part 1: Developing And Evaluating An Effective Credit Policy

The following article is part one of a two part post on mitigating the risk of selling goods and services on credit. This topic is of particular significance given the effective shut down of the Canadian economy resulting from the COVID-19 pandemic, and these posts are aimed toward assisting creditors with managing risk in these uncertain economic times. This post addresses steps creditors can take now to improve their credit policies and ensure compliance and prompt payment by their customers, and part two will address options available to creditors when a customer defaults or becomes insolvent.    

Many types of businesses supply goods and services to their customers on credit. These types of credit relationships can arise informally, such as where a business supplies goods or services and then invoices or collects on the invoice at a future date. They can also arise through more formal, structured processes whereby customers will complete an application for credit