The management of accounts receivables management deals with viable credit and collection policies. A very liberal credit policy will increase sales and also bad debt losses. On the other hand a conservative credit policy will reduce bad debt losses but also reduce sales. A good credit policy should seek to strike a reasonable balance between sales and bad debt losses.
The objective of receivables management is to promote sales and profits until that point is reached where the returns that the firm gels from funding of receivables is less than the cost that the firm has to incur in order to fund these receivables. This, the purpose of receivables is directly connected with the firms objective of making credit sales.
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