COLLECTION OF POLICIES AND PRATICES
• HIGH CREDIT RATING- extend credit • LOW CREDIT RATING- it will result to slow paying accounts or even bad debts affecting the central operation of the business
CAUSE OF DEINQUENT ACCOUNTS • 1.) Debtor who misunderstands the credit terms • 2.) the careless debtor • 3.) temporarily out of funds • 4.) chronic slow debtor • 5.) unethical debtor • 6.) insolvent debtor • 7.) dishonest debtor
Importance of prompt collection • 1.) Requires less working capital tied up in receivables. • 2.) reduces the losses from bad debts • 3.) decreases the probability of expensive legal action • 4.) reduces costs of correspondence, bookkeeping etc • 5
PRINCIPLES OF A SOUND COLLECTION POLICY • 1.) The Cr. Should inform the debtor in PRECISE, CLEAR words the terms of credit. • 2.) When an account becomes overdue , the collection machinery
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- Spring '14