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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. 3: Debt Recovery and Minimising Bad Debt 3.1
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 Formula for Average Collection Period Average Collection Period = 365Days * (Average Accounts Receivables / Net CreditSales) Importance of Average Collection Period The average collection period sheds light on how effective debtcollection is. What is a High Average Collection Period?
Effective credit control procedures, such as regular monitoring of outstanding balances and proactive debt recovery, ensure that any potential issues are addressed promptly, reducing the likelihood of significant losses. Consider using a debtcollection agency if internal efforts are unsuccessful.
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