In: Finance
1. What collection monitoring measures do managers express a preference for in actual practice?
2. What are the main differences faced by U.S. credit managers when selling on credit abroad?
1. The collection monitoring measures that managers have a preference for in actual practice is the measure based on aged trial balance (ATB). ATB is an accounts receivable schedule in which the customer sales invoices are segregated into different age buckets and each bucket is based on the number of days that a particular invoice is aged from its actual due date. This monitoring measure is preferred by many managers as it is provides several benefits – it identifies potential risk areas, it impacts cash flows and write offs of bad debts, and it helps in reducing costs and shoring up the profitability margins.
2. The main differences faced by US credit managers when selling on credit abroad include complications caused by exchange rate changes, arbitrariness of customer payment behavior, and the legal and economic environment. Credit histories and bank references may also be difficult to obtain. Managing the entire cash flow timeline and automating the credit process aid the credit manager in creating shareholder value from foreign credit sales.