The credit policy question every board should ask before 2027

Every December I watch the same scene play out in boardrooms across Nairobi. Directors spend hours on the following year’s budget. They argue about revenue to the last cent, query marketing lines and chop a few heads. Then someone adjourns the meeting, without questions about who will be allowed to sell on credit, or by what rules.

I’ve sat on both sides of that table, first as a CFO and now recovering money for companies. In most firms, the honest answer is that nobody ever wrote it down.

Credit goes out on habit, on relationships, and on whoever needs to hit a number that month. That works until a big customer starts paying late. Then everyone goes looking for the rulebook and finds there isn’t one.

A credit policy doesn’t need to be clever. Simple, it must say how much risk the business is willing to carry on its debtors, who says yes, what they need to see first and what happens when a customer stops behaving.

Start with who signs. If the person approving a customer’s limit earns commission on that same customer, you have a conflict sitting in plain sight.

I don’t say that to insult sales teams. They’re paid to sell, and they should sell. But approval has to sit somewhere else, and it should climb with the amount at stake: the credit controller up to a set figure, the CFO above that, and the board itself for any single customer big enough to hurt the year.

Then agree on your appetite, in numbers. Three are enough: a target for debtor days, a cap on the share of revenue sold on credit and a ceiling on what any one customer can owe.

A director can check every month without needing a finance degree. They also drag price into the room. When you give a customer 90 days, you’re lending them your working capital for free. Your pricing should reflect that, even if your sales team would rather it didn’t.

In my experience, customers rarely default out of the blue. The invoice that used to clear in 30 days starts taking 50. Payments arrive in two halves. A new finance manager calls wanting to revisit terms. Sometimes the business has quietly changed owners.

Each of these sounds harmless on its own, which is exactly why they get explained away. A good policy names them and says what each one sets off, whether that’s a limit review, a credit hold or a call from someone senior.

The hardest question is when an account leaves the building. Internal teams hold on too long. Some of it is loyalty and some of it is pride, because handing a file to an outside collector can feel like admitting defeat.

I understand that feeling. But every month a debt ages, it gets harder and more expensive to recover. Settle the exit point before emotions get involved: say 60 days past due with no credible payment plan, and take that call away from whoever sits closest to the customer.

A good collector isn’t there to replace your relationship. They’re there to save the cash while it can still be saved.

 Finally, ask for the numbers. Every month the board pack should carry the ageing profile, the top ten debtors, any exceptions approved outside policy and the accounts sent out for recovery. So, before you sign off the 2027 budget, ask management one simple question: can I see our credit policy?

 If you get a blank look, or a file nobody has opened in five years, you already know what goes first on January’s agenda.

-The writer is a Certified Public Accountant and the founder of Marathon Debt Recovery Ltd