What are the techniques available to monitor the receivables?
Techniques to monitor the receivables are available on macro basis and micro basis.
Techniques available on Macro Basis:
- Average Collection Period (ACP) indicated the average period of credit allowed by the company to the customers. It is calculated in two stages as described below:
Calculation of daily or monthly sales:-
Credit Sales during the year/ Number of months or Number of days.
Calculation of Average Collection Period:-
Sundry Debtors in Balance Sheet / Daily/Monthly Sales
Techniques available on Micro Basis:
- Age wise analysis: This analysis involves classification of outstanding receivables at any given point of time into different age groups. It provides superior information about the quality of receivables on the basis of which the company can concentrate on its collection efforts on long period outstanding receivables.