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Use the following formula to determine your CEI: (Beginning receivables + Monthly credit sales - Ending totalreceivables) ÷ (Beginning receivables + Monthly credit sales - Ending current receivables). Then multiply the answer by 100 to get a percentage.
” This junk AR comes in a variety of forms, such as: Short payment/deductions Debit memos Unapplied credit memos Unapplied cash Late payment fees and other surcharges Early payment discounts taken but not deserved Clutter obscures the true amount a customer owes and causes confusion.
From this conversation, you will learn how perilous the baddebt risk is with this customer, and how urgent your reaction must be. It involves intensive management of the customer’s totalreceivable balance supported by a substantial reduction in their credit limit.
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