Accounts Receivable (2 of 4): Extending Credit - John M. Leask II CPA/ABV, CVA

Accounts Receivable

Part 2 of a 4 part series

Warning Signs:

    • Receivables exceed 50 days outstanding.
    • Days receivables outstanding increases significantly.

  • Significant decrease in sales/receivables.

Steps to Improve: EXTENDING CREDIT

  • Tighten up credit practices.
  • Investigate new credit customers adequately.
  • Check references before extending credit to a new customer.
  • Establish credit limits; then, enforce them.
  • Write sales contracts to permit recovery of collection fees.
  • Write sales contracts/credit agreements to permit charging interest.
  • Consider credit insurance.

Back to The Business Doctor

>>Accounts Receivable (1 of 4): Control
>>Accounts Receivable (2 of 4): Extending Credit
>>Accounts Receivable (3 of 4): Speeding Collections
>>Accounts Receivable (4 of 4): Handling Difficult Collections