Among Texas businesses seeking reliable cash flow and healthy receivables, a clear and formal credit policy is foundational. This article guides Texas commercial enterprises and their AR managers through structuring a credit-extension framework, tailored for the Texas business environment and the needs of a commercial debt collection agency. It also addresses how working with a dedicated Texas commercial debt collection agency can reinforce your credit-policy discipline.

Texas Business & Credit Environment

Texas’s business climate continues to flourish. According to the Texas Governor’s Office, small businesses make up 98.6 % of the workforce in Texas. Texas.gov+1 The state also has an active program to support business financing: the Texas Small Business Credit Initiative (TSBCI), which allocates over $472 million to assist small-business capital access. Texas Small Business Credit Initiative+1

For a commercial business extending trade credit, this context means:

• A large and diverse business network in Texas means more counterparties, but also more variation in creditworthiness.
• Easy access to financing may reduce some businesses’ reliance on vendor credit—but not eliminate the risk of late payments or defaults.
• Legal/regulatory environment is business-friendly but still subject to change (see recent legislation on financing disclosures in Texas). Holland & Knight

Thus, Texas businesses must adopt a formal credit policy to mitigate risk and ensure receivables remain manageable.

Common Accounts Receivable (AR) & Credit-Extension Challenges

When extending credit to other businesses, typical pitfalls include:

• Insufficient credit evaluation: Without standard criteria, companies risk granting terms to clients with poor payment history or weak financials. Guidelines from Dun & Bradstreet stress that a credit policy must clearly answer key questions like “What is our mission?” and “What level of risk are we willing to accept?” Dun & Bradstreet
• Inconsistent terms and approval processes: If sales teams and credit teams apply different rules, confusion arises, and risk increases.
• Poor documentation and monitoring: Without formal limits, review schedules, and escalation procedures, past-due receivables grow unchecked.
• State-specific regulatory shifts: For example, Texas’s HB 700 (effective Sept 1, 2025) imposes new disclosures for commercial sales-based financing. Though this applies more to alternative financing, it signals that the regulatory environment can evolve. Holland & Knight
• Collection weaknesses: Late payers tie up cash, and if a vendor lacks a clear escalation or collection path, the cost of carrying receivables rises.

A formal credit policy addresses these challenges by setting consistent standards, enabling proactive monitoring, and improving recovery chances.

How a Professional Agency Supports Credit Policy & Collections

A commercial debt-collection partner in Texas brings value in several respects:

• Policy reinforcement: A collection agency can help you craft escalation clauses (e.g., 30/60/90-day triggers) that align with your credit policy.
• Early intervention: Having a predetermined hand-off to collections undercuts the cost of extended receivables.
• State-specific recovery expertise: A firm familiar with Texas’s statutes and court procedures navigates liens, judgments, and enforcement more efficiently.
• Data-driven insights: The agency can report on debtor behaviors, enabling your credit-policy tweaks (e.g., tightening terms for certain industries).
• Risk management: By reducing bad-debt write-offs and shortening days-sales-outstanding (DSO), the agency helps preserve your working-capital and margins.

When your policy builds in these support mechanisms, you move from reactive to proactive AR management.

Texas-Specific Considerations for Your Credit Policy

When drafting a business credit policy for Texas operations, consider the following state-specific factors:

1. Choice of law and venue: Specify in contracts the governing law (Texas) and the venue for disputes (county or state court) to streamline enforcement.
2. Statute of limitations for commercial claims in Texas: Under Texas law, the limitation for a written contract is typically four years. Be sure your policy marks when time-bars begin (e.g., date of breach or invoice).
3. Disclosure changes in financing law: With HB 700 becoming effective Sept 1, 2025, commercial financing arrangements in Texas will face increased disclosure and registration requirements. While trade-credit may differ, it signals heightened regulatory scrutiny. Holland & Knight
4. Industry and regional risk profiles: Texas hosts strong energy, manufacturing, and logistics sectors—all with cyclical risk. Your policy should account for these fluctuations.
5. High business formation and turnover rate: According to the Governor’s Small Business Handbook, the state supports more than 2 million small businesses and ranks high for business starts. Texas.gov+1 This means your credit policy should include frequent reviews of business-credit status and active monitoring of newly formed firms.
6. Escalation and collection pathways: Since Texas has a favorable legal environment for business, ensure your policy includes steps for early collection action and when to refer to a collection agency.
7. Use of federal and state resources: Integrate your credit-policy education with resources like the Texas Governor’s Small Business Handbook. Texas.gov+1

Sample Framework: Credit Policy for a Texas Business

Here is a structured approach you can adapt for a Texas-based commercial credit policy:

A. Purpose

Establish consistent rules for extending credit to business customers in Texas and reduce receivable risk.

B. Credit Approval Criteria

• Minimum business operating history (e.g., 2 years)
• Financial statement review (within last 12 months)
• Business credit-report score threshold
• Trade-reference check (at least two vendors)
• Texas Secretary of State business-entity status verification
• Internal limit assignment by risk tier and industry

C. Payment Terms & Conditions

• Standard terms: Net 30 (or Net 45 for approved accounts)
• Discounts for early payment if applicable (e.g., 2 %/10 Net 30)
• Interest or late-fee provision spelled out (in compliance with Texas law)
• Credit reserve hold: New customers limited to purchase-order only until third invoice paid on time

D. Monitoring & Review

• Monthly AR aging reports
• Accounts moved to “watch” status when >30 days overdue
• Credit-limit reevaluation every 12 months (or sooner if risk changes)
• Credit hold when customer exceeds assigned limit or passes 60 days past due

E. Escalation & Collections

• Day 31–60: Internal collections call and reminder notice
• Day 61–90: Final demand letter; place account on hold for future deliveries
• Day 91+: Refer to Texas-based commercial collection agency; consider legal action or lien where applicable

F. Internal Roles & Responsibilities

• Sales must obtain completed credit-application form
• Credit department issues written credit-limit notice to Sales and AR
• AR Manager monitors aging and flags accounts for review and hand-off
• Legal/Collections coordinate external action and document retention

G. Documentation & Policy Maintenance

• Written credit-application form and signed terms and conditions
• All approvals documented by date, approver, limit, conditions
• Policy reviewed annually, with version control and distribution to staff

For Texas-based companies, a formal business credit policy is a critical tool for managing risk, improving cash flow, and enhancing collections outcomes. When structured properly—with clear criteria, terms, monitoring, and escalation pathways—it becomes a proactive asset rather than a reactive burden. By pairing your internal policy with the capabilities of a Texas-aware commercial debt-collection agency, you gain stronger protection and better outcomes.

Your next step: Draft your credit-application form, define your credit-tiers, and schedule a policy-review meeting with key stakeholders (CFO, AR Manager, Sales Director). Then align your collection-hand-off schedule to your policy’s escalation triggers.

References

• “How to Write a Business Credit Policy,” Dun & Bradstreet. Dun & Bradstreet
• Texas Governor’s Small Business Handbook. Texas.gov+1
• Texas Small Business Credit Initiative (TSBCI). Texas Small Business Credit Initiative+1
• Texas commercial financing legislation (HB 700). Holland & Knight