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Start by determining your days average collection ratio. If the ratio is >14 days past your net terms the process you are currently using is broken.

Establish your weighted credit extension policy. What $ amount you will extend to each customer. Use past history to establish this value and build quantifiable criteria based on you financial statements. Once the weighted process is defined establish the process that will be followed from the (buy) date until the net term date.

Establish this collection policy in writing (very important) now pass along the accountability to a staff personnel that can be quantifiably measured to your newly defined policy. Full benchmarks and accountability should be give to that staff personnel, because that will be a criteria for the individual to cover his/her labor burden and provide profitable value for their results to your bottom line.

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15y ago

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Related Questions

What is the average collection period?

The average collection period is the amount of time that is taken to recover money. Often the average collection period applies to business and sale-related circumstances.


If the accounts receivable turnover ratio is decreasing what will happen to the average collection period?

Avg Collection Period increases.


What is Accounts receivable collection period ratio formula?

Average Colection period: Accounts Receivables divided by Average daily credit sales


What does a high average collection period indicate?

A high average collection period indicates that a firm is having trouble collecting its outstanding credit, thereby transferring it to their accounts receivables. It could be because of policy - maybe no fees, or the management in charge of collection is not doing their job.


What is average payment period?

Average Payment Period is the total opposite of the Average Collection Period. This is the average time taken by the company to pay off its credit purchases.Formula:APP = Accounts Payable / (Annual Credit Purchases / 365)


If the average daily sales is high is the collection period high or low?

low


What is payment period?

Average Payment Period is the total opposite of the Average Collection Period. This is the average time taken by the company to pay off its credit purchases.Formula:APP = Accounts Payable / (Annual Credit Purchases / 365)


What is the term for the average time it takes for customers to pay you?

The term for the average time it takes for customers to pay you is the average collection period.


What is average payment?

Average Payment Period is the total opposite of the Average Collection Period. This is the average time taken by the company to pay off its credit purchases.Formula:APP = Accounts Payable / (Annual Credit Purchases / 365)


What relationship exists between the average collection period and accounts receivable turnover?

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What information does the aging schedule for accounts receivable show that the average collection period may not?

The average collection period only shows how long it takes to collect your credit sales on average. The aging schedule shows your total accounts receivable, and the exact amounts that are owed in each time frame categories.


How do you calculate collection period?

Oh, dude, calculating the collection period is like measuring how long it takes for a company to collect its accounts receivable. You just divide the average accounts receivable by the net credit sales and boom, you've got your collection period. It's not rocket science, just basic math with a fancy name.