What is credit pilicy explain the terms of credit polcy?
Answers
Credit policy is the statement in which guidelines are written in order to execute credit transactions in a company. Credit policies are designed by the top level management. Credit policies would be lenient if the management is trying to boost the sales. Most common credit policies are in this form " 2/5 net 20", it means that if credit amount is paid in 5 days then 2% trade discount is given while due date is 20 days after the selling date.
A credit policy is a critical document for any business , but especially one in the credit - heavy construction industry .
Terms of credit policy :-
♥ Credit period - It is time duration for which credit is extended to the customers .
♥ Cash discount - In order to induce the customers/debtors to pay their bills early, the cash discount is allowed .
--> It indicates the rate of discount and the
period for which the discount is offered .
Hope it helps !!
Shreya ❤