Credit Sales Policy and Procedure

MARKETING AND SALES DEPARTMENT

1 MARCH 2019
TABLE OF CONTENT
CREDIT SALES…………………………………………………………….……………………………….……3
PURPOSE …………………...…….……………………………………………………………………..………3
SCOPE…………………………………………………………………………………….……………..…………4
POLICY………………………………………………………………………………………………..……………4
For Retailers………………………………………………………….…………..……………….4
For Cement Products Producers (CPP): ….………………………...…………………5
PROCEDURE………………………………..……………………………….………….….…………….…….5
Credit sales and payment terms …………….……………….…………………………5
Roles, Responsibilities and Authorization Level….………..………………………..7
Main stages of the sales process on credit sales……….….………………………8
EFFECTIVE DATE……………………………………………………………………….……………………..10

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1. CREDIT SALES

Credit sales is a condition in which the Habesha Cement agrees to deliver

products and services to the buyer, together with credit sales invoices or
other credit documents, for payments with agreed time.

Sales on credit basis however, has risks on delays of payments or non-

payments for products delivered.

Therefore, careful screening and identifying credit worthy customers, signing

contractual agreement with the buyer accompanied by financial guarantee are
extremely important.
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2. PURPOSE
To attract direct sales to new prospective customers and to retain
existing ones; and to enable to implement RTM strategy

To define the requirements for establishing credit sales and payment
terms for retailers and cement product producers (CPP).

 This is an operational document defining a number of operating

rules for the sales process that must be followed by the entire
department.

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 3. SCOPE

This Credit Sales

Policy and
Procedure will
be extended
only to Retailers
and CPM in
Addis Ababa and
regional towns.

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4. POLICY
Credit sales Policy is a policy that will be provided to customers
who are eligible and willing to buy OPC 42.5R and PPC 32.5N;
and able to settle the monetary value up on agreed time frame
with submission of security requirements.

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4.1 FOR RETAILERS:

No Sales volume UOM Purchase Credit period

Frequency (after delivery) Approval
PPC
1 1200-2499 Quintal Per month 30 days Manager, M & S

2 2500-3999 " " 35 days "

3 4000-6999 " " 40 days "
4 7000-9800 " " 45 days "

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4.2 FOR CEMENT PRODUCTS PRODUCERS (CPP):

No Sales volume UOM Purchase Credit period

Frequency (after delivery) Approval
PPC
1 800-1600 Quintal Per month 30 days Manager, M & S
2 1601-2400 " " 35 days "
3 2401-3999 " " 40 days "
4 4000-6000 " " 45 days "
OPC
1 1200-2499 Quintal Per month 30 days Manager, M & S
2 2500-5200 " " 35 days "

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5. Procedure
5.1 Credit sales and payment terms

The proposal is submitted via analysis completed and signed

off by the sales officer, verified by sales division head and
approved by marketing and sales department manager.

 Once approved an E-mail and/or paper based notification

informing the Sales officers will be sent out, informing all of
the appropriate people involved for delivery.
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Based on the credit evaluation, the marketing and sales
department has the discretion to require some tangible form of
security in order to continue the credit approval process.

The security requirements can include, but are not limited

to any of the following:
unconditional bank guarantee
postdated cheque
according to the bilateral agreements.

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 Discount and rebate are not offered to the credit sales customers;

All credit sales shall be settled on the specified date, after the goods are
delivered.

No customer shall be granted credit sales, if any previous credit invoice is
not settled within the credit period.

However, Marketing and Sales manager may consider customers

additional credit sales requests and authorize sales beyond the initial
approved amount if He/She believe that has advantage for the company.

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Payment postponement requests initiated by customers shall be
entertained by only marketing and sales manager.

Credit sales record shall be maintained by the sales officers and

consequently verified by sales division head on daily follow up sheets.

The sales division head shall check daily sales transactions of sales
officers and accordingly ensure receipt of equivalent unconditional bank
guarantee and/or postdated cheque for amount sold on account to eligible
customers.
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Cheques returned from bank for insufficient fund should be settled by
cash or CPO within three days from the date communicated to the customer.

The sales division head shall keep an eye on the timely settlement of the
overdue account and report status to the marketing and sales manager.

Marketing and sales manager with the consultation of CEO shall

accordingly resort to enforced collection unless payment or unacceptable
proposal for payment is obtained within the next 30 days.

In its day-to-day operations, the sales division will consistently adhere
to all company policies regarding fair and equitable treatment in customer
communications and relations. 15
5.2 Roles, Responsibilities and Authorization Level
This section contains a brief description of the roles and responsibilities of
involved:

CEO –Ultimate authority for approval of overall policy and procedure; and signing
of agreement.

Marketing and Sales Manager – Reports to the CEO. Leads and controls
the credit sales function. Responsible for determines procedures and rules for
the entire department, authorizes credit sales limits, approval of the credit
sales.
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Sales division head: – Reports to the marketing and sales manager.
verifying completeness of unconditional bank guarantee and postdated
cheques collected from eligible customers
summit to Finance department,
the day-to-day management of invoicing, maintaining high standards
of invoice accuracy, handling invoicing disputes, and
all matters pertaining to invoicing.
Reviews the daily report.

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Sales Officers: - Reports to the sales division head. Responsible for
initiation and submission of credit sales application and after examining
credit worthy customers, and get verification from sales division head and
approval from Marketing and sales manager.

Sales person – Reports to the sales division head. Responsible for

preparing the invoices and ensuring that they are sent on time, maintains
report.

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Finance Manager: Reports to the CEO. Responsible for managing the
credit review and accounts receivable balance to minimize collection
exposure in accordance with the overall company operational and financial
objectives.

General accounts division head– Reports to the Finance Manager. Responsible

for the day-to-day management and training of the in-house collection team.
Contacts past due accounts per requirements with the consultation of sales
division head. Monitoring of creditors accounts, cash position, payments control.

Cashier – Reports to the General accounts division head. Contacts past due
accounts per requirements. Accepts payment terms with the approval of the
General accounts division head. Maintains records in collection system. 19
Senior attorney: -Reports to CEO. Responsible for preparing the agreement.
Law Suits: If a customer fails to pay the debt and if we still haven't been paid after the due
date, it's probably time to turn the matter over to the court. Conditions typically include the
right to pass on legal fees and collection costs, as well as the right to establish the venue
and jurisdiction for legal action with the consultation of CEO and marketing and sales
manager.

Marketing research team. Reports to marketing and sales manager. The marketing
research team will periodically conduct market assessment, review and re-evaluate payment
terms and credit sales of existing customers to support new customer requirements and to
manage risk as financial and business conditions change.

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 6. Main stages of the sales process on the credit sales
6.1 Commercial prospection
It is essential to take into account the financial situation of retailers’ and CPPs’
before prospecting them.
6.1.2 Evaluating New Customers’ Creditworthiness
Establishing a process of evaluating a customer’s credit worthiness will reduce risk.
We should obtain information like:
the customer’s name and related business at least three trade references (if any)
names and entity type a bank contact
the names of principals information provided by the customer
company profile
for customers that need a large amount of
phone number, e-mail and home addresses credit sales, we should obtain their audited

 Renewed business license financial statements.

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Renewed tax identification number
6.1.2 Reevaluating the Creditworthiness of Existing Customers
Reevaluate the credit histories of existing customers on a regular basis – at least
quarterly. It’s a good idea to create a schedule for reevaluation, perhaps based
on the size of the customer’s credit limit.

6.2 Mutual agreement

This stage occurs during the trade negotiations and reaching in to agreement; and
during and after the customer accepts the quotation. This is the heart of the
prevention of outstanding risk. These conditions should be an integral part of
commercial negotiations.

6.3 Delivery
This step should not be overlooked as it is often a source of disputes that generate
late payment and have negative impacts on the business relationship. 23
6.3 Friendly collection

Essential phase not to suffer late payments, the cash collection should be
structured and professionalized to be effective.

The recovery process must be defined in a combined result of recovery actions

(phone calls, email, mail return receipt, letter notice).

6.4 Litigation

In case of failure of amicable collection that ended with sending a letter of

formal notice, collection action continues.

Effective Date
This credit sales policy is effective from . 24