Customer Credit Approval Checklist Template

Owned by the credit analyst. The scope answers decide which approvers and checks follow.

• Record the request from sales — customer, limit and terms requested, expected monthly sales and first order date
• Answer the scope questions — new account or limit increase, UK, US or other customer, and which limit band the request falls in
• Collect a complete credit application — legal name, registration number, registered and trading addresses, owners or directors, accounts contact and references
• Get your terms and conditions of sale signed or accepted — payment terms, late payment interest and any retention of title clause
• For a limit increase, pull the payment history instead — days beyond terms, disputes and returned payments over the last 12 months
• Name the credit analyst, credit manager and final approver — sales cannot approve its own customer

• Confirm the legal entity on the official register — Companies House in the UK, the state of formation’s business register in the US: status, age and registered office
• Check the filing record — overdue accounts or a proposal to strike off are warning signs
• Check for secured lenders — the charges register at Companies House or a UCC lien search in the US
• Search insolvency notices and court judgments — The Gazette and the judgments register in the UK, court and bankruptcy records in the US
• Confirm the applicant really is the company — email domain, delivery address and signatory match the registered business, not a lookalike

• Obtain a commercial credit report — from a business credit reference agency, with its rating, suggested limit and payment behaviour attached
• Take up two or three trade references — ask each for the limit, terms, payment record and length of relationship
• Check the referees are independent and real — a referee at the same address or with the same directors proves nothing
• Request a bank reference where your policy requires one — and record the wording given
• For large UK customers, read their published payment practices report — it shows how quickly they pay suppliers

• Obtain the latest accounts — and management accounts if the filed accounts are old or omit the profit and loss account
• Analyse liquidity, leverage and profitability — current and quick ratios, gearing, interest cover and the trend over two or three years
• Note any going concern paragraph or modified audit opinion — and escalate it with the proposal
• Assign the internal risk rating — using the criteria in your credit policy, with the reasons recorded
• Propose the limit and terms — sized to expected sales over the payment terms plus the time it takes you to stop supplying
• Decide whether security is a condition — answering Yes shows Phase 6

Each approval halts the checklist until it is answered. Higher bands add approvers on top of the lower ones.

• Credit manager approval — every request, with the analysis and proposal attached
• CFO approval — shown only for Band 2 and Band 3 limits, or terms longer than standard
• Credit committee decision — shown only for Band 3 limits; attach the minutes
• Record the decision and any conditions — approved, approved with security, reduced limit or declined
• If declined or counter-offered, notify the applicant — for US trade credit, within a reasonable time and with written reasons if requested within 60 days

Shown only when approval is conditional on security. Nothing ships on credit until it is in place.

• Personal or parent company guarantee — in writing and signed by the guarantor, with authority checked for a company
• Letter of credit or standby letter of credit — check the issuing bank, amount, expiry and documents required
• Deposit or payment in advance — received and allocated before the first credit order
• Trade credit insurance — confirm the insurer’s limit on this buyer and diarise the policy’s overdue reporting deadlines
• Security over goods supplied — a retention of title clause in the UK, or a filed UCC security interest in the US

• Enter the limit, terms, risk rating and review date in the accounting system — by finance, not sales, and checked by a second person
• Confirm the limit and terms to the customer in writing — with any conditions attached
• Tell sales and the AR team — including what happens when an order would exceed the limit
• Set the review triggers — an annual review date, plus orders over the limit, payments beyond terms, credit report alerts, ownership changes and overdue filings
• File the decision pack — application, reports, analysis, approvals and security in one place