Is an increase in collection period necessarily bad? Explain.

Answer 1

yes,
but if an increase in collection period is compensated by an increase in how long you take to pay your creditors, then it's not so bad. The worst case is if you have to pay your creditors cash on delivery but your debtors take months to pay you. In that case, you're financing your debtors. You need to be tougher on your debtors.

Receivables is a reliable means of helping to determine whether it is a good investment play or not. Companies stay efficient and competitive by keeping inventory levels down and speeding up collection of what they are owed. In this article, we’ll take you through the process step by step.