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Fundamentals of Financial Management, Third Edition by Vyuptakesh Sharan

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10.4 MONITORING AND CONTROL OF CREDIT

Monitoring of credit is done at the customer’s level as well as at the aggregate level. At the customer’s level, the objective is to expedite collection so as to reduce bad debt losses. At the aggregate level, the objective is to examine whether the accounts receivable move exactly in conformity with the laid down policies.

10.4.1 Monitoring at the Customer’s Level

Collection from a customers should be looked after by an exclusive department, known as the credit department. Customers should be classified on the basis of size of receivables. Different classes of customers should be treated differently. If the collection is not made within the prescribed time period, the customer should be reminded over the ...

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