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As economic headwinds build, business leaders tend to batten down the hatches by cutting cost and minimizing risk. In terms of extending credit, tightening credit controls to minimize the risk of baddebt loss is a natural result of this mindset. Here’s more insights on customer profitability.
Companies tend to offer more favorable terms to customers with higher credit scores, such as higher credit limits or longer payment terms while imposing stricter terms on higher-risk customers with lower scores. Monitoring CreditRisk : Companies may use credit scores to monitor the creditrisk of their existing customers.
Under-performing AR has the potential to create a cash flow crisis that can shut down your business in very short order. Without effective AR management, your cash flow is subject to entropy as the ARages, as well as to the shocks caused by customer defaults. This software firm did not actively manage its AR.
What Is an ARAging Report? As an assessment and diagnostic tool, it’s hard to overstate the importance of your company’s accounts receivable (A/R) aging report. ARaging reports provide concrete information that can be used to take action. An aging report also analyzes how your customers’ companies work.
Accounts receivable (AR) is a critical component of a company’s financial health, representing the outstanding invoices or money owed by customers for goods or services delivered but not yet paid for. Efficient management of accounts receivable ensures steady cash flow and minimizes the risk of baddebts.
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