Accounting: Tools for Business Decision Making, 5th Edition

Published by Wiley
ISBN 10: 1118128168
ISBN 13: 978-1-11812-816-9

Chapter 8 - Reporting and Analyzing Receivables - Broadening Your Perspective - Critical Thinking: BYP8-8

Answer

The President Messtopper Corporation. The Cash Flow management is most important aspect for a business. Your company has started / carrying out the business, without making a cash budget. Therefore the trouble in paying the bills arises. Therefore the company should immediately prepare a cash budget. In this cash budget, the company should forecast the expected expenses and collections. Any shortfall should be planed, regarding the source from the cash is to be arranged or the expenses, which can be postponed. Further, the company should instruct their accounting department to prepare the lists of accounts receivable, with the amount and period of outstanding. The list should be handed over to the concerned sales person to collect the outstanding.

Work Step by Step

The company should a clear credit policy. The credit should be allowed only to the customers, who have the good credit ratings. Proper credit investigations must be carried out before allowing any credit to the new customer. A team should monitor the outstanding and collection follow-up.
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