Accounting Procedures: Credit Granting Procedure

It is a procedure of granting credit to the customers on their request. This is a complete procedure that ensures one thing that a firm’s credit is not granted to the customers or other business entities that are unable to pay this credit later. A separate department is made in companies to deal with the credit issues and reviews all the requests of the customers for credit approval before granting credit to those customers. Sometimes the sales department sends a copy of sales order of the customer that shows each order requested by the customer. There are different steps that are involved in an order entry process that will ultimately result in issuing the order on credit to the customer of not. The procedure involves following steps:-

  • Receiving the Sales Order

This is the step where the credit department receives a copy of sales order from the sales department presented by the customer

  • Issuing a credit application

This step involves issuing a credit application to the customer if it is a new customer. The credit application must be returned to the credit department

  • Reviewing the Credit Application

At this step the application filled and returned by the customer is reviewed by the credit department for approval or rejection

  • Assigning a credit Level to the customer

At this step a certain credit level is issued to the customer and the customer can order products purchase according to this limit

  • Approving Sales order

If the order credit level is within the limit the credit staff will approve the sales order and stamps the order as an approved one

  • Filing Credit documentation

This step involves creating a file for the customer and recording all the information of the customer in this file

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