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Accelerating the collection of cash from sales

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List and describe four actions a firm can take to accelerate the collection of cash from sales. For each action listed, describe the potential costs involved with the action.

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Solution Summary

This solution explains methods that management can utilize to decrease the number of days in the cash collection cycle.

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1. Revise the A/R collection policy, making the terms more attractive to customers. The customers would then want to pay their amount due in full quicker, in order to take advantage of any discount offered. Suppliers often do this with customers. By offering payment discounts, customers want to save money by taking advantage of the discount period. The main drawback is that the company will lose a percentage that would have otherwise been paid, by offering the discount. It generally is of greater advantage to the company, and is one of the easiest and most ...

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