Question

Discuss why the bad debt percentage or any other similar credit-control percentage is not the ultimate measure of success in the management of accounts receivable.

What is the key consideration?

(5 points or more)

Answer 1

Management of accounting receivables is focusing upon the the amount of quality assets which are receivables by the bank or the company because quality assets will mean that those assets which have a lower probability of being defaulted upon, so all the assets which are having a very high creditworthiness are important in management of account receivables because account receivables will always focus upon elimination of the bad debts from the books of accounts, because when there would be a lower amount of bad debt, it would mean that the company is having a better amount of assets over its books of accounts.

Hence, the bad debt percentage is a representation of overall amount of bad assets which are present in the books of accounts and Hence, the company will be trying to eliminate these bad asset percentage and reduced to a minimum in order to maximize his overall asset quality and hence it will be having a better quality of receivables over its books of accounts which will make it survive and sustain through adverse economic situations.