Credit & Collections Policy

1.0 Policy Purpose & Scope 

The purpose of this policy is to outline the requirements for establishing payment terms with Thomas Food International, Canada Ltd. (“Company”) Buyers, as well as the monitoring of those terms. The policy also notes alternatives to be made available to those Buyers that do not qualify for Company credit. 

The role of the Credit and Collections Department is to minimize credit risk across the accounts receivable portfolio to improve the firm’s cash flow. This also serves to support the Sales staff in maintaining the highest levels of Buyer service delivery by being involved across the Buyer’s life cycle from order submission to revenue collection. As Sales develops new Buyer relationships, credit procedures foster collaboration between the Sales and credit departments to ensure sound credit decisions are made to support profitable growth. Core activities of the Credit and Collections Department are: 

• Analyzing credit and setting credit limits 

• Managing the collections function 

• Developing and implementing financial policies and procedures 

• Protecting the company and mitigate the risk of loss from extending credit to Buyers that cannot pay. 

All these elements have both financial and strategic implications in executing successful business processes. 

This policy applies to all sales made from the Company except where otherwise noted. 

EXCLUDED: Buyer pre-pay purchase transactions are out of the scope of this policy. 

2.0 Policy Statement 

The Company will extend credit to Buyers if they meet its threshold criteria for granting the credit. The basic form of credit is maximum credit defined by current Company Insurer. The maximum credit can be expanded with approval of the Company Executive Management as part of the Credit Appeal’s process. In situations where a Buyer’s ability to repay is in question, a personal, corporate, or bank guarantee may be required. 

The Credit department will review the credit applications of all new Buyers to determine their worthiness to receive credit and the amount of that credit. The credit level may be reduced if a Buyer has a low credit score, minimal trade references and on the credit report, if it has been formed within the past year. 

The Credit department will periodically review the payment history of existing Buyers to determine whether their existing credit levels are reasonable or need to be revised. This review shall also be conducted whenever business conditions warrant a general retraction or expansion of credit levels. 

The terms of sales offered to Buyers are standardized under existing sales. The standard sales terms offered to Buyers is net 7 days. 

The credit manager is authorized to extend credit to Buyers as outlined in this policy, to facilitate the Credit Appeals process and to communicate with them regarding their credit status. The credit department is tasked with instructing Buyers regarding their payment responsibilities. 

3.0 Definitions 

Buyer: Means a Buyer Entity or a Buyer Group where: 

Buyer Entity means the legal entity, including any branch offices, trade styles, or divisions, legally responsible for paying for the goods Delivered and/or services provided which is approved for coverage under this Policy. 

Buyer Group means all Buyer Entities under common control of a parent, where control means direct or indirect ownership of more than 50% of the voting share capital. 

• For the purpose of this policy, we are using Buyer Group for our defining purposes within the language of the credit procedures. 

Protracted Default: Means the non-payment of all or part of a Trade Debt by a Buyer due to the occurrence of one of the following events: 

a) A receivable amount due to the Company becomes > 30 days past terms of sale, excluding Disputed receivables, or 

b) The Buyer’s payment order or request has been rejected by its bank. 

State of Default: Means a payment default by a Buyer due to the occurrence of: 

a) Protracted Default; 

b) Insolvency; or 

c) Political Risk event. 

Current Buyer: Means a Buyer who has placed an order in the last 6 months. Ledger Criteria for current Buyers: 

The Company may establish a credit limit for a current buyer of the Company’s goods and services using ledger payment history so long as they meet the definition of a current buyer AND have not been in a State of Default during the last 6 months. For ALL current BUYERS, their maximum credit limit allowed by the Company using ledger criteria = 150% of the highest PAID credit extended over a 30- day period within the last SIX (6) MONTHS that has been paid within invoice due date. If a CURRENT buyer enters a state of default due to protracted default of UNDISPUTED trade debt, but then later CURES this past due, they can qualify using one of the other methods of qualification within these credit procedures but may NOT qualify for credit under ledger criteria UNTIL the state of default has aged 6 months. 

BPO: Means Business Process Operations 

Executive Management: Means CEO, CFO or CCO 

4.0 Credit Approval 

4.1 Credit Application 

The credit application sets the Sales Terms and Conditions. It also captures details including Buyer’s legal identity, physical and billing address, contact information, list of principals / stockholders, bank and trade references. 

Each new Buyer is asked to fill out a new credit application before credit is granted for the purposes of collecting bank and trade reference data to determine creditworthiness and capturing the correct billing details to ensure invoices are being sent to the correct address of the legal entity responsible for payment. It is mandatory that Buyers adhere to all Terms and Conditions listed in the Company’s Sales Terms and Conditions. 

4.2 New and Inactive Buyer Approvals 

For those Buyers that are either new (have never ordered) or are not current buyers (have not ordered in the last six months), credit will be established using one of the following methods. The credit file MUST be documented and dated using one of these methods BEFORE the order is released: 

• Credit Information Agency Reports. Using a recognized third party credit information agency report, pulled and dated BEFORE the order release we may approve an initial credit UP TO a similar high credit on similar terms to that reported on the credit agency report. This is with the qualification that the report has no current significant negative information under suits liens or judgments. This report will stay valid for six (6) months. 


• Third party trade references. We may obtain 2 written trade references and set a credit limit on a Buyer up to 150% of the highest credit balance with each reference showing the following: supplies and or services have been made under similar credit terms; and indicate a positive payment experience where the value of the invoices were paid within 30 days of the original due date. 

• Financial statements. We may use the most recent accountant prepared financial statement on the Buyer obtained by the Company, for a period ending no more than 18 months prior to the date of Supply. The financial statements must show a tangible net worth of at least 3X the amount of credit requested AND positive working capital AND profitability. 

If a prospective Buyer cannot be verified through any of the above-listed sources, further proof of legitimate operations must be obtained before the Buyer is approved and order released. If a credit reference cannot be verified through proof of legitimate operations, the reference may still be obtained, but may not be used, in the credit analysis of the Buyer until further proof of legitimate operations is documented. 

4.3 Credit Terms 

Standard credit terms are Net 7 days. In certain circumstances, longer credit terms may be extended. In these instances, the Company Executive Management has the authority to approve extended terms. 

The Buyer will be placed on a purchasing hold due to, but not limited to, any of the following conditions: 

• A history of slow payment with the Company or other vendors 

• Collections or bankruptcy 

• Poor or incomplete financial information 

• Derogatory information 

• Companies with less than six months of established credit history 

• Buyers with no activity for six months or more will be required to reestablish credit limit unless otherwise approved 

• Any Buyer no longer qualified under the credit insurance policy in place 

4.4 Credit Exception Review 

If a Buyer requires additional or increased credit limit, Sales may request a credit review from the Company. The criteria included but not limited to will include: 

• Credit Evaluation findings/output 

• Payment history with the Company, if applicable 

• Financial benefit summary to the Company 

Credit exception review will be undertaken no more than once per quarter per Buyer. 

4.5 Customer Setup (after approval) 

Upon approval, customer will be setup in the Company’s accounting System of Record in accordance with the credit recommendation details documented in the credit approval decision. It is vitally important the billing and shipping details be in alignment with the credit decision. 

5.0 Risk Management 

The Credit Manager will use risk management tools, such as insurance limits and terms, to mitigate risk across the Buyer base. Annual credit review dates will be based on current credit insurance policy in place. A sample testing of accounts on a quarterly basis will be performed. 

6.0 Collections 

6.1 Delinquent Accounts 

The Company has engaged Business Process Outsourcing (“BPO”) services to assist with collecting receivables. The Company will identify delinquent accounts and provide daily updates. The Buyer will then be contacted by BPO when a balance becomes three to five (3-5) days past due. A record of each Buyer contact will be documented including: 

• Buyer contact’s name(s) 

• Details of the conversation or message left 

• Check numbers, amounts sent, date of when payment was sent 

• Proposed payment agreements for approval 

A phone call must be made if a Buyer has a balance more than five days past due without providing a payment commitment. In addition, pending orders can be held with email notification from a Sales person. If a Buyer has a past due balance more than thirty (30) days, pending orders can be held with the Company Executive Management notification. 

6.2 Identification of Uncollectable Account 

Once an account reaches 60 days past due, it will be shut off from future sales, or moved to prepayment or Cash on Delivery terms. At this time, the Credit Manager will make a recommendation to the Company Executive Management as to the best course of action. Actions can include, but are not limited to: 

• Written demands for payment 

• Third-party intervention 

• Legal remedies for payment 

6.3 Reinstatement of Credit Account 

Once the past due balance has been paid in full, the Buyer’s credit may be reassessed and a re-approval process for credit may be undertaken by the Credit Manager with approval of the Company Executive Management. 

6.4 Returned Cheques / NSF 

When a Buyer’s check is returned for any reason, the Buyer’s account will be put on a temporary hold while it is assessed. The Buyer may be put on Prepay (funds received in bank account) terms, if deemed appropriate. The Buyer’s credit may be reassessed and a re-approval process for credit may be taken by the Credit Manager with the approval of the Company Executive Management. 

6.5 Collection Communication Channels 

The primary email for collection contact and related correspondence is 

7.0 Primary Roles and Responsibilities 

7.1 Finance & Accounting 

• Authority for the Credit and Collections activities overseen by Credit Manager 

• Responsible for facilitating credit reviews and approvals, serves as point of contact for BPO operations and oversees Credit Appeals process 

• Responsible for setting up and updating customer accounts in the Company’s System of Record in accordance with the credit decision 

• Responsible for reviewing and releasing sales orders placed on hold (providing they have met release criteria). 

7.2 BPO: Compass 

• Responsible for managing credit application intake and rendering credit findings 

• Leverage known channels to assist in identifying credit limit 

• Responsible for the day-to-day operations of both the credit analysis and collection functions 

• Responsible for reporting on collections and credit activities conducted for the Company’s accounts. 

7.3 Sales 

• Adhere to the Company Credit and Collection Policy 

• Ensure Buyer is aware of Company Credit Policy and Sales Terms and Conditions 

• Leverage Coface for credit preview for Buyer both existing and prospective 

• Follow-up with Buyer to make sure that a completed credit application is received, and to not process or ship the Buyer’s order until credit has been approved 

• Direct questions regarding existing Buyer credit limit increases or orders on hold to Credit Manager 

• Monitor existing accounts over limit or past due and support collection activities as required. Direct incoming calls or emails regarding the payment status of an open invoice to appropriate channel (see Collection Communication Channels). 

7.3 Levels of Authority 

• The Company Executive Management will have the authority to override and approve credit limit increase if limit established through the credit review process is not sufficient, or the limit falls outside of the credit insurance criteria. Reassessing credit will not be more than once a quarter per Buyer 

• Credit Manager to facilitate Credit and Appeals management as defined in the Company Delegation of Authority (DOA) matrix