Some companies prefer to keep the cash collection process internal by receiving customer payments by check...

Some companies prefer to keep the cash collection process internal by receiving customer payments by check in the mail direct to the company and maintaining employees that receive, open, record and process the customer checks to the bank. Other companies prefer using the bank as an external processing service through lockboxes and using bank employees to receive, open mailed checks, record and process the checks received. Which method do you prefer? Describe the benefits and concerns with each method.

Expert Solution

There are two methods:

A. Cash collection process

B. Processing external payments

A. Cash collection process: In cash collection process, companies tries to collect cash from other businesses to whom they had issued invoice earlier. In this, the invoices get paid by their due date which improves the quality of the company. Late payments may cause major fault.

B. Processing external payments: As the payment word indicates means to transfer the funds into another's account.

On my part, i will prefer cash collection process because it will increase the asset of the company and income will increase. Not only this, the quality of the products and services of the company will also get improved.

Benefits of cash collection process : It will improve the quality of the company, It will provide enough capital to carry out the daily operations of the company, It will help in clearing the receipts.

Benefits of processing external payments: It will reduce the debt of the company as previous payments will clear out. Thus making the financial stability of the company more stable and the good will of the company will increase.

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