You are the owner of DDD Company. The company is engaged in providing services to telecommunication companies. It has a multi-million sales. However, on an average collection cycle, you only collect the sales after 6 months. Upon reviewing the company's financial statements, you notice a large number of receivables and a large number of payables. The company is having a hard time paying its debts since it cannot collect promptly the receivables. The sales manager told you that the company cannot stop accepting projects because there are many competitors in the market. On the other hand, the collection manager suggested collecting first the receivables before accepting a new project. If you are the owner of DDD Company, what should you do?
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
You are the owner of DDD Company. The company is engaged in providing services to telecommunication companies. It has a multi-million sales. However, on an average collection cycle, you only collect the sales after 6 months. Upon reviewing the company's financial statements, you notice a large number of receivables and a large number of payables. The company is having a hard time paying its debts since it cannot collect promptly the receivables. The sales manager told you that the company cannot stop accepting projects because there are many competitors in the market. On the other hand, the collection manager suggested collecting first the receivables before accepting a new project. If you are the owner of DDD Company, what should you do?
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