Course Objective


1. Formal, documented credit extension policies and procedures should be established.
2. Credit limits must be established for each customer. Credit limits must be maintained on customer credit records and should be based on a review evaluating the customer’s ability to pay. It is recommended that reliable outside sources be used to develop customer credit limits.
3. Periodic reviews of approved credit limits and current receivable balances should be performed prior to processing additional customer orders or shipments. Financial management approval should be required prior to extending credit in excess of previously approved limits.
4. The adequacy of approved customer credit limits should be reviewed at least annually. Where appropriate, adjustments to credit limits should be made, and approved by
appropriate operational and financial management.
5. The credit extension function must be independent from the order entry and credit memo processing functions.
1. Credit reviews may be inconsistent or inadequate.
2. Products or services may be sold to an unacceptable credit risk or customers who have exceeded their respective credit limits, resulting in uncollectible accounts.
REFER TO STANDARD(S) 1, 2, 3, 4, 5

  • Syllabus