Accounting for IGCSE & O level - Advanced Principles (Section 1 - No. 34)
Is an increase in the trade receivables collection period good or bad for business?
Good: The collection period has now become too long, due to poor credit control, resulting in fewer increases in trade debts.
Bad: The collection period has now become too long, due to poor credit control, resulting in fewer increases in trade debts.
Good: The collection period has now become too short, due to poor credit control, resulting in fewer increases in trade debts.
Bad: The collection period has now become too short, due to poor credit control, resulting in fewer increases in trade debts.
Forklaring
An increase is bad as a business is taking longer to collect payments, potentially resulting in more bad debts.