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Credit control is a vital aspect of financial management for businesses. It involves managing creditsales and making informed credit decisions, ensuring timely payment from customers, and minimising bad debt. Setting Up Credit Control Processes 1.1 This is where business credit checking comes into play.
The accounts receivable turnover ratio is a financial ratio that measures how efficiently a company collects its accounts receivable. It is calculated by dividing net creditsales by average accounts receivable.
The average collection period is an important accounting metric that evaluates a company’s ability to manage its accounts receivable (AR) effectively. It measures the time it takes for the business to collect payments from its clients, which reflects its cash flow effectiveness and ability to meet short-term financial obligations.
Maintaining a healthy cashflow through credit control is crucial for the long-term success and sustainability of any enterprise, especially against the backdrop of soaring insolvencies and record instances of late payment. One effective strategy for achieving this goal is to implement a robust credit control system.
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