Accounts Receivable and Collections Policy and Procedures

ACCOUNTS RECEIVABLE AND COLLECTIONS POLICY AND PROCEDURES

1. Document Preamble & Recitals

This Accounts Receivable and Collections Policy and Procedures Agreement (the "Agreement") is entered into and made effective as of [Effective Date] (the "Effective Date"), by and between [Company Name], a [State/Country of Incorporation] corporation, having its principal place of business at [Company Address] (hereinafter referred to as the "Company"), and [Counterparty/Client Name], a [State/Country of Incorporation] [entity type], having its principal place of business at [Counterparty Address] (hereinafter referred to as the "Customer").

RECITALS

WHEREAS, the Company provides certain goods, products, and/or services to the Customer pursuant to commercial agreements, statements of work, and purchase orders;

WHEREAS, the Customer desires to purchase such goods and/or services on credit terms, subject to the credit evaluation, credit limits, and collection protocols established herein; and

WHEREAS, the Parties intend for this Agreement to serve as a binding legal framework governing the extension of credit, invoicing, payment obligations, delinquency management, and remedies for non-payment;

NOW, THEREFORE, in consideration of the mutual covenants, promises, and conditions contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

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2. Operational Definitions

For purposes of this Agreement, the following terms shall have the meanings ascribed below, which meanings shall be equally applicable to both the singular and plural forms of the defined terms:

1. "Aging Schedule" means the periodic report generated by the Company categorizing the Customer’s Accounts Receivable according to the length of time invoices have been outstanding, typically segmented into current, 1-30 days past due, 31-60 days past due, 61-90 days past due, and over 90 days past due.
2. "Agreement" means this Accounts Receivable and Collections Policy and Procedures document, including all recitals, exhibits, schedules, and subsequent written amendments executed by both Parties.
3. "Available Credit Limit" means the maximum aggregate monetary amount of credit the Company extends to the Customer at any given time, calculated as the Credit Limit minus outstanding invoices and unbilled approved orders.
4. "Bad Debt" means any Account Receivable that has been determined by the Company, in its sole commercial discretion, to be uncollectible after exhausting commercially reasonable collection efforts.
5. "Business Day" means any day, other than a Saturday, Sunday, or a statutory holiday recognized by the banking institutions in the primary jurisdiction of the Company.
6. "Collection Costs" means all reasonable legal fees, court costs, filing fees, collection agency commissions, expert witness fees, and out-of-pocket expenses incurred by the Company in enforcing its rights under this Agreement.
7. "Credit Limit" means the maximum ceiling of credit ([Dollar Amount]) established by the Company’s credit department for the Customer, subject to periodic review and adjustment.
8. "Default" means any breach, failure, or refusal by the Customer to observe, perform, or comply with any covenant, term, condition, or obligation contained within this Agreement or any underlying commercial transaction.
9. "Due Date" means the exact calendar date upon which payment for an invoice becomes due and payable to the Company, calculated in accordance with the Payment Terms.
10. "Insolvent" means the inability of a Party to pay its debts as they become due, the filing of a voluntary or involuntary petition under bankruptcy or insolvency laws, the appointment of a receiver or trustee for a substantial part of its property, or an assignment for the benefit of creditors.
11. "Late Charge" means the interest penalty and administrative fee assessed on any overdue balance, calculated at the rate of [Interest Rate, e.g., 1.5%] per month, or the maximum rate permitted by applicable law, whichever is less.
12. "Outstanding Balance" means the total aggregate sum of all unpaid invoices, accrued Late Charges, applicable taxes, freight charges, and outstanding Collection Costs owed by the Customer to the Company.
13. "Payment Terms" means the agreed timeframe within which the Customer must remit payment for issued invoices, specifically defined as Net [Number, e.g., 30] days from the date of the invoice, unless otherwise stated in writing.

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3. Substantive Terms & Obligations

3.1 Credit Application and Evaluation

1. Prior to the issuance of any goods or services on credit, the Customer shall complete and submit a formal Credit Application, providing accurate financial statements, trade references, banking details, and tax identification numbers.
2. The Company reserves the right, at its sole discretion, to approve, modify, restrict, or deny credit to the Customer based upon credit scoring, financial analysis, payment history, and macroeconomic risk factors.
3. The Customer represents and warrants that all financial information provided to the Company is true, correct, and complete, and constitutes an ongoing representation of the Customer's financial solvency.

3.2 Credit Limits and Monitoring

1. The Company hereby establishes an initial Credit Limit of [Dollar Amount] for the Customer.
2. The Company reserves the right to unilaterally increase, decrease, suspend, or revoke the Customer’s Credit Limit at any time upon written or electronic notice to the Customer, particularly in the event of deteriorating financial condition, past-due balances, or changing market conditions.
3. If any order or requested service causes the Customer's Outstanding Balance to exceed the established Credit Limit, the Company reserves the right to withhold shipment, delivery, or performance of pending and future orders until the Outstanding Balance is reduced below the Credit Limit or advance payment is secured.

3.3 Invoicing and Billing Standards

1. The Company shall issue invoices to the Customer via electronic mail or standard postal delivery upon the fulfillment of orders, completion of milestones, or rendering of services.
2. Invoices shall itemize the goods or services provided, applicable taxes, shipping fees, purchase order numbers, and the precise Due Date.
3. The Customer shall review all invoices upon receipt. Any dispute regarding an invoice must be submitted in writing by the Customer within [Number, e.g., 15] days of the invoice date, detailing the specific line items contested and the factual basis for the dispute. Failure to dispute an invoice within this timeframe constitutes an absolute waiver of any defenses, offsets, or claims regarding that invoice.

3.4 Payment Obligations and Remittance

1. The Customer shall remit full payment of the Invoice Amount on or before the Due Date. Payment terms are strictly Net [Number, e.g., 30] days.
2. Payments shall be made in lawful currency of the United States via electronic funds transfer (ACH/Wire), corporate check, or other method expressly authorized by the Company in writing.
3. Remittances must reference the applicable invoice numbers to ensure proper allocation. In the absence of specific remittance instructions from the Customer, the Company reserves the right to apply payments against the oldest outstanding invoices, accrued Late Charges, or outstanding Collection Costs in its absolute discretion.

3.5 Delinquency Management and Late Charges

1. Any invoice remaining unpaid after the close of business on the Due Date shall be deemed delinquent and subject to a Late Charge of [Interest Rate, e.g., 1.5%] per month (representing an annual percentage rate of [Annual Rate, e.g., 18%]), or the maximum rate allowed under applicable law.
2. The assessment or collection of Late Charges shall not be construed as an agreement by the Company to extend credit or forbear from exercising its legal remedies for non-payment.

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4. Default, Termination, and Remedies

4.1 Events of Default

The occurrence of any one or more of the following events shall constitute an immediate "Event of Default" under this Agreement:

1. Failure of the Customer to pay any Outstanding Balance, invoice, or Late Charge within [Number, e.g., 5] days of its Due Date.
2. Breach by the Customer of any representation, warranty, covenant, or material term set forth in this Agreement or any other commercial agreement with the Company.
3. The Customer becomes Insolvent, ceases operations as a going concern, makes an assignment for the benefit of creditors, or petitions for protection under any bankruptcy, receivership, or insolvency statute.
4. Any attachment, execution, or levy is levied upon a substantial portion of the Customer’s assets and is not discharged within [Number, e.g., 30] days.

4.2 Notice and Cure Periods

1. Upon the occurrence of an Event of Default relating to non-payment or administrative breaches, the Company shall provide written notice of default to the Customer.
2. Except for payment defaults or insolvency (which shall be subject to immediate remedy without cure periods), the Customer shall have a period of thirty (30) business days from the date of receipt of written notice to cure the specified default (the "Cure Period").
3. If the Customer fails to cure the default within the designated Cure Period, the Company may immediately exercise any and all legal and equitable remedies available.

4.3 Remedies Upon Default

Upon the occurrence of an Event of Default that remains uncured following the expiration of the applicable Cure Period (or immediately in the case of payment or insolvency defaults), the Company may, at its sole discretion and without waiving any other rights, take any or all of the following actions:

1. Acceleration of Debt: Declare all outstanding invoices, unbilled balances, and future commitments immediately due and payable in full, without notice or demand.
2. Suspension of Performance: Immediately suspend the delivery of all goods, services, shipments, or performance under this Agreement and any other ongoing commercial contracts with the Customer.
3. Revocation of Credit: Permanently revoke the Customer's credit privileges, placing all accounts on a cash-in-advance (CIA) or cash-on-delivery (COD) basis.
4. Legal Action: Initiate formal judicial proceedings, arbitration, or retain third-party collection agencies to recover the Outstanding Balance, plus all accrued Late Charges and Collection Costs.
5. Set-off: Exercise any right of set-off or recoupment against any funds, deposits, or credits of the Customer currently held by the Company.

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5. Boilerplate Legal Provisions

5.1 Severability

If any provision, clause, or section of this Agreement is held to be invalid, illegal, or unenforceable by a court or tribunal of competent jurisdiction, such invalidity shall not affect the remainder of this Agreement. The affected provision shall be deemed modified to the minimum extent necessary to make it valid and enforceable, and the remaining provisions shall continue in full force and effect.

5.2 Entire Agreement

This Agreement, together with any incorporated Credit Applications, invoices, and associated commercial contracts, constitutes the entire understanding and agreement between the Company and the Customer with respect to the subject matter hereof. This Agreement supersedes all prior oral or written negotiations, commitments, term sheets, or understandings between the Parties.

5.3 Force Majeure

Neither Party shall be held liable for any failure or delay in fulfilling or performing obligations under this Agreement (excluding the Customer’s absolute obligation to pay money for goods and services already received) when such failure or delay arises out of causes beyond the reasonable control of the affected Party, including acts of God, natural disasters, war, terrorism, civil unrest, labor strikes, pandemics, utility failures, or governmental restrictions (each a "Force Majeure Event"). The burdened Party shall notify the other Party in writing within [Number, e.g., 5] business days of the onset of the Force Majeure Event and shall use commercially reasonable efforts to resume performance as soon as practicable.

5.4 Governing Law and Jurisdiction

This Agreement, and all claims or causes of action (whether in contract, tort, or statute) that may be based upon, arise out of, or relate to this Agreement, shall be governed by, enforced under, and construed in accordance with the internal laws of the State of [State/Jurisdiction], without regard to its conflict of laws principles. Each Party irrevocably and unconditionally submits to the exclusive jurisdiction of the state and federal courts located within [County] County, [State], for any legal action, suit, or proceeding arising out of or relating to this Agreement.

5.5 Dispute Resolution

1. In the event of any dispute, controversy, or claim arising out of or relating to this Agreement, including its formation, breach, termination, or validity, the authorized senior executives of both Parties shall first attempt in good faith to resolve the dispute through direct negotiation within fifteen (15) business days of receiving written notice of the dispute.
2. If the dispute is not resolved through direct negotiation, the Parties agree that the dispute shall be submitted to binding arbitration administered by the [Arbitration Body, e.g., American Arbitration Association] in accordance with its commercial arbitration rules. The place of arbitration shall be [City, State], and the proceedings shall be conducted in the English language before a single neutral arbitrator. The award rendered by the arbitrator shall be final and binding, and judgment upon the award may be entered in any court having jurisdiction thereof.
3. Notwithstanding the foregoing, the Company retains the right to seek provisional remedies, injunctive relief, or collection actions through a court of competent jurisdiction to protect its intellectual property, confidential information, or to secure monetary recovery for overdue accounts.

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6. Formal Execution Block

IN WITNESS WHEREOF, the Parties hereto have caused this Accounts Receivable and Collections Policy and Procedures Agreement to be executed by their respective duly authorized officers or representatives as of the Effective Date written above.

COMPANY:

[Company Name]

Signature: _________________________________________________

Name: [Authorized Signatory Name]

Title: [Title, e.g., Chief Financial Officer]

Date: [Date]

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CUSTOMER:

[Counterparty/Client Name]

Signature: _________________________________________________

Name: [Authorized Signatory Name]

Title: [Title, e.g., Director of Operations]

Date: [Date]