Raghu

• Jul 19th, 2011

 

Credit Management is the process of managing the outstanding receivables of the organistion as per the policies adopted by the organisation. Companies might the approach of categorising the B/R by their ageing and provision for the same would be taken into account while preparing the financial statements for an organisation.

farfoosha

• Oct 1st, 2012

 

The objective of managing accounts receivable is to have both the optimal amount of
receivables outstanding and the optimal amount of bad debts.
a. This balance requires a trade-off between the benefits of credit sales, such as more
sales, and the costs of accounts receivable, e.g., collection, interest, and bad debt
costs.
b. The optimal credit policy does not seek merely to maximize sales (for example, by
lowering credit standards, offering longer discount periods, or charging lower interest)
or to minimize default risk. Thus, a company should extend credit until the marginal
benefit (profit) of an additional sale is zero (considering opportunity costs of
alternative investments).
Gliem CMA review chapter 10 ( managing Current Assets)