Credit Control Policy for UAE SMEs 2026: A Template Your Finance Team Can Adopt This Week

A credit control policy is the rulebook that turns ad-hoc receivables work into a process. Most UAE SMEs run without one. They pay for the gap every time a difficult buyer pushes back on a stop-supply, the commercial director argues for a limit exception, or the owner gets dragged into a payment-plan call that the finance manager should have handled.

This template is written for owners, managing directors, CFOs and finance managers of UAE SMEs in the AED 5-80 million revenue band. It covers what a credit control policy is, the six areas it has to cover, the credit-limit framework that scales assessment to exposure, the payment-terms grid by buyer type, the CFO sign-off matrix, and the operational details that decide whether the policy lives in the business or on a shelf: credit scoring, stop-supply triggers, exception process, annual review.

Why a written policy matters

Most UAE SME finance managers cannot enforce the stop-supply trigger today. The reason isn’t a missing data point or absent paper authority. It’s that there’s no written policy to point to when the commercial director protests. Every difficult conversation defaults to ad-hoc judgement, the relationship argument wins, and the cadence collapses.

A two-page policy, signed by the owner and visible to the commercial team, changes that conversation from personal judgement to documented rule. The finance manager doesn’t defend the trigger anymore. The policy does.

The policy is also a key audit item. UAE auditors increasingly test that credit controls are documented and operating effectively, particularly for SMEs in continuous net-receivable positions where IFRS 9 ECL provisioning materially affects the financial statements.

Six areas the policy has to cover

A complete UAE SME credit control policy covers:

1. Credit-limit framework — how new buyers are credit-assessed by exposure tier
2. Payment terms by buyer type — standard terms by buyer category, exception process
3. Deposit and milestone billing — for project-based work, advance percentages and retention rules
4. Hold-supply trigger — at what days-past-due commercial supply stops
5. CFO sign-off matrix — authority levels for limits, discounts and write-offs
6. Dunning cadence template — five-stage escalation aligned to UAE buyer norms

The policy itself is typically 4-8 pages — short enough that the commercial team will actually read it, which matters more than completeness. The credit-scoring matrix, dunning template library and exception log live as appendices.

Area 1: setting credit limits

Credit-limit framework scales assessment effort to exposure. The principle: low exposure deserves light assessment; high exposure requires full diligence.

Tier 1 — AED 0 to 50,000 credit limit

Assessment requirements:

• Commercial registration and licence verification (trade licence, free-zone licence, GRE registration as applicable)
• One trade reference confirmed (existing supplier email confirmation of payment behaviour)
• Owner/manager name and contact details

Standard initial limit: AED 25,000 unless higher specifically requested Approval: Sales manager + finance manager Time to approve: 2 working days

Tier 2 — AED 50,000 to 250,000 credit limit

Assessment requirements:

• Tier 1 requirements plus:
• Bank reference (last 6 months of statements or bank confirmation letter)
• Two trade references from existing suppliers
• Latest unaudited management accounts (for businesses below AED 50m revenue)
• Management sign-off (CFO or finance director)

Standard initial limit: 25-50% of the buyer’s average monthly purchase volume across the supplier base Approval: CFO with finance manager recommendation Time to approve: 5 working days

Tier 3 — AED 250,000+ credit limit

Assessment requirements:

• Tier 2 requirements plus:
• Last two years of audited financial statements
• Three trade references
• Al Etihad Credit Bureau report on the owner/PIC where applicable
• Bank reference letter
• Owner sign-off (for limits above AED 500,000)

Standard initial limit: Determined case-by-case based on financial-statement analysis (typically current ratio, days-receivable, gearing, profitability trend) Approval: Owner with CFO recommendation Time to approve: 10 working days

Limit increase process

Existing buyers can request limit increases after a clean payment history of 6-12 months. The increase request follows the same tier structure based on the proposed new limit (not the increment).

Area 2: payment terms by buyer type

Payment terms should match buyer risk and UAE market norms.

Exception requests follow the CFO sign-off matrix (Area 5). For project-based work, the standard terms above apply to recurring spend; milestone billing rules apply to project deliverables.

Area 3: deposits and milestone billing

For project-based businesses (consulting, IT services, construction, engineering, fit-out), the policy specifies the deposit and milestone billing structure:

Deposit on engagement letter / PO acceptance:

• Consulting and professional services: 25-50% of total fee
• IT services / software development: 30-50%
• Construction and fit-out: 10-30% mobilisation advance
• Equipment supply with installation: 30-50% on PO, balance against delivery + commissioning

Milestone billing structure:

• Defined deliverables with sign-off triggers
• Milestone invoices issued within 2 working days of buyer sign-off
• Final 10-15% retention released against handover and warranty period as per contract

Retention release:

• Construction and fit-out: 5-10% retention typically released 6-12 months after handover, subject to defects rectification
• Equipment supply: warranty retention as per contract terms

The policy specifies that milestone invoices follow the standard dunning cadence (Area 6) from due date, with retention release triggered by the contractual conditions rather than the standard cadence.

Area 4: when to stop supply

The hold-supply trigger is the most powerful lever in the collection cadence. The policy specifies:

Trigger threshold: All invoices above AED 25,000 at 60 days past due (lower threshold for higher-risk buyers as determined by credit scoring).

Implementation: ERP hold on the customer account. The hold prevents new sales orders, delivery notes and invoices being raised against the buyer until released.

Notification: Formal email to buyer’s finance contact and commercial contact on the day the hold is applied, copying the buyer’s owner/CEO for invoices above AED 100,000.

Release conditions:

• Full settlement of all overdue balances, OR
• Written payment plan signed by buyer’s CFO/owner and Velmont Crest CFO (using the template in the dunning cadence library)

Override:

• Commercial team cannot override informally
• Override requires CFO written approval
• All overrides logged in the credit policy review file for annual policy review

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The day-60 trigger is the policy’s teeth. If commercial overrides become routine, buyers learn the cadence is theatre and the entire credit policy loses authority.

For the full dunning cadence including the stop-supply trigger language, see our dunning letter template library.

Area 5: who signs off on what

The CFO sign-off matrix sets authority levels for credit decisions, settlement discounts and write-offs. Authority must be written so it cannot be challenged in difficult conversations.

Standard UAE SME matrix (calibrated to AED 30m revenue business):

The thresholds scale with business size. For SMEs above AED 100m revenue, the AED amounts typically double. For SMEs below AED 15m revenue, halve the thresholds.

Area 6: the dunning cadence

The policy specifies the standard dunning cadence. The full template library, with letters in English and Arabic, lives in the dunning letter template guide and is referenced from the policy as an appendix.

Summary cadence:

For the supporting DSO improvement plan, see our days sales outstanding improvement guide. For the underlying AR ageing diagnostic, see the accounts receivable ageing playbook.

Scoring a buyer before you ship

Credit scoring produces a rating that drives credit limit, payment terms and assessment frequency. A typical UAE SME methodology:

Internal indicators (weight 60%):

• Average days-to-pay over last 12 months (weight 30%)
• Dispute frequency — disputes raised per 100 invoices (weight 10%)
• Returned cheque history — count over last 24 months (weight 10%)
• Credit limit utilisation pattern — average vs peak (weight 10%)

External indicators (weight 40%):

• Commercial registration validity, licence type, years in operation (weight 10%)
• Audited financial statement health — current ratio, gearing, profitability trend (weight 15%, only for Tier 2+ buyers)
• Bank reference quality (weight 5%)
• Al Etihad Credit Bureau report (weight 5%, where applicable)
• Trade references (weight 5%)

Output rating:

The scoring matrix is calibrated annually against actual 12-month collection performance — if A-rated buyers are missing payment dates, the matrix is mis-weighted and needs adjustment.

Wiring this into IFRS 9 ECL

IFRS 9 requires that the SME provision for expected credit losses (ECL) on all trade receivables at each reporting date. The credit policy’s credit-scoring output feeds the ECL provision matrix directly:

Plus standard ageing-bucket overlays for all ratings:

• 61-90 days: 8%
• 91-180 days: 25%
• 180+ days: 60%

UAE auditors increasingly test that the credit scoring and ECL matrix are integrated and calibrated to realised losses. The annual policy review is the standard moment for this calibration.

The paperwork FTA needs for bad-debt relief

Article 64 of the UAE VAT Executive Regulations allows VAT-registered suppliers to recover output VAT on bad debts subject to:

1. Supply has occurred and VAT charged
2. Consideration written off in the supplier’s books
3. More than 6 months have passed since supply
4. Customer notified in writing of the amount written off

The credit policy specifies that:

• Write-offs above AED 25,000 require CFO approval (per Area 5 matrix)
• Write-offs above AED 100,000 require owner approval
• The bad-debt-relief working paper is prepared quarterly from the 180+ ageing bucket
• The customer-notification letter (which can be the day-90 legal referral letter, the final demand or a separate write-off notification) is filed with the write-off journal entry

Lining up with the 28-day VAT cycle

FTA rules require VAT-registered businesses to pay net VAT within 28 days of period-end. Output VAT on issued invoices is paid regardless of whether the invoice has been collected.

The credit policy’s payment terms framework should be calibrated to this constraint. SMEs in continuous net-payable VAT positions (most trading SMEs) need tight payment terms to avoid funding the FTA out of overdraft. SMEs in net-refund positions (most exporters) can offer more generous payment terms because the VAT timing flow funds the working capital gap.

For the full VAT mechanics, see our VAT registration guide.

When a cheque bounces

Cheque dishonour in the UAE was largely decriminalised in January 2022 under the amended Commercial Transactions Law. Returned cheques are now generally a civil matter unless aggravating circumstances apply.

The credit policy specifies returned-cheque handling:

• Day 0 (cheque returned): same-day email + phone call requesting immediate replacement
• Day 3: formal letter on letterhead, returned cheque attached
• Day 7: referral to legal counsel for civil claim
• Account automatically moved to COD or advance for next 12 months minimum
• Credit rating downgraded by one grade (e.g. B to C); two returned cheques in 24 months trigger E rating and trade suspension

The yearly review meeting

The credit control policy is reviewed annually, ideally aligned to the audit cycle:

Review scope:

• Credit-scoring matrix calibration against actual 12-month collection performance
• Payment-terms benchmark against UAE sector norms (especially when CCC has moved)
• Sign-off threshold review against business growth
• Regulatory updates (FTA bad-debt relief, Commercial Transactions Law, IFRS 9 methodology)
• Dunning cadence performance review
• Stop-supply trigger overrides log review

Output:

• Updated policy document with version number and effective date
• Owner sign-off on material changes
• Communication to finance and commercial teams
• Updated dunning templates and ERP configuration as required

Material changes mid-year (e.g. acquisition, new buyer segment, regulatory change) require a policy amendment with owner sign-off.

Where UAE SMEs trip themselves up

The most common failure is writing the policy and then not enforcing it. The document goes on a shelf, the cadence drifts, and the team goes back to deciding each case on the day. Nearly as common is setting the thresholds too low for the size of the business. An AED 50k write-off needing owner approval makes sense at AED 10m revenue; at AED 60m it’s just a bottleneck on the owner’s calendar, and a bottleneck is where overdue accounts go to sit unactioned.

Then there’s the failure to connect the two halves of the policy — approving Tier 3 limits on a D-rated buyer because the commercial team pushed hard for the sale, which defeats the point of scoring the buyer at all. Letting commercial overrides become routine does the same damage from the other direction: once overrides are normal, the stop-supply trigger and the sign-off matrix stop meaning anything.

Two more are worth naming. A policy that ignores ECL provisioning and bad-debt-relief documentation isn’t aligned to IFRS 9 and FTA requirements, and that gap shows up later as audit findings and delayed tax recovery. And treating the whole thing as a finance document is a mistake, because credit control is really a commercial discipline — the sales team, the commercial director and the owner all need to be in the briefing and the annual review, not just cc’d on it.

When to bring in outside help

Most UAE SMEs benefit from advisory support on credit policy when one or more of the following is true:

• No written credit policy exists today
• The current policy is outdated (more than 2 years since review)
• Stop-supply triggers are routinely overridden
• The 90+ AR bucket exceeds 15% of total AR
• Audit has flagged inadequate credit controls or IFRS 9 ECL methodology
• The business is preparing for investment, bank facility renewal or sale where receivables quality will be diligenced

Typical AR/AP advisory engagements include the policy drafting, credit-scoring matrix construction, sign-off matrix calibration, briefing of finance and commercial teams, integration with the dunning cadence and weekly AR review meeting, and annual policy review on the audit cycle.

For owners wanting a CFO-level review across credit policy, AR/AP and the wider working-capital cycle, see our CFO advisory page and the working capital playbook.

How Velmont Crest helps

Velmont Crest drafts and rolls out credit control policies for UAE SMEs as part of our accounts receivable and payable management and CFO advisory work. Typical engagements include:

• Policy diagnostic of the current state (often: no written policy exists)
• Draft policy aligned to UAE FTA, IFRS 9 and Commercial Transactions Law requirements
• Credit-scoring matrix construction calibrated to the SME’s actual buyer base
• CFO sign-off matrix sized to the SME’s revenue and risk tolerance
• Dunning template library (English + Arabic) — see the dunning letter guide
• Briefing of finance and commercial teams
• Configuration of the cadence in Zoho Books, QuickBooks Online or Xero
• First-quarter facilitation of the weekly AR review meeting
• Annual policy review on the audit cycle
• Integration with the wider accounting and bookkeeping cycle

This is advisory and accounting support — Velmont Crest is a DED-licensed accounting and advisory firm, not a licensed debt-collection agency or financial-services entity. Legal recovery and litigation are referred to UAE-licensed law firms.

To discuss your current credit control set-up and where the gaps are, book a free consultation or WhatsApp the team directly.