Accounting for IGCSE & O level - Advanced Principles (Section 2 - No. 13)
Is a reduction in the trade receivables collection period good or bad for business?
Good: The collection period was previously too long and it improved credit control helps to reduce late payments and irrecoverable debts.
Bad: The collection period was previously too long and it improved credit control helps to reduce late payments and irrecoverable debts.
Good: The collection period was previously too short and it improved credit control helps to reduce late payments and irrecoverable debts.
Bad: The collection period was previously too short and it improved credit control helps to reduce late payments and irrecoverable debts.
Explanation
A reduction is good. This means a business is collecting payments faster, improving cash flow and decreasing the likelihood of bad debts.
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