What is management of receivables? What are its objects?
Receivables are amounts owed to the company by the customers to who company sell goods or services in the normal course of business. The main purpose of managing receivables is to meet competition and to increase sales and profits.
Following are the objectives of receivables management which will help us to understand the purpose of receivables:
1. To optimize the amount of sales
2. To minimize cost of credit
3. To optimize investment in receivables.
4. To increase credit sales.
Therefore, the main objective of receivable management is to create a balance between profitability and cost.
What are the areas covered by receivables management?
Following are the areas covered by receivables management:
- Credit Analysis
- Credit Terms
- Financing of Receivables
- Credit Collection
- Monitoring of Receivables