Managing accounts receivable involves five steps, of which the following occurs first: Group of answer choices accelerate cash receipts from receivables. establish a payment period. determine to whom to extend credit. monitor the collections.
Question
Managing accounts receivable involves five steps, of which the following occurs first: Group of answer choices
accelerate cash receipts from receivables.
establish a payment period.
determine to whom to extend credit.
monitor the collections.
Solution
Managing accounts receivable involves five steps, of which the following occurs first:
Determine to whom to extend credit.
Explanation:
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Before a company can extend credit to a customer, it must first determine the creditworthiness of that customer. This involves assessing the customer's ability and willingness to pay.
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This step is crucial because it helps to minimize the risk of non-payment and bad debts. It typically involves checking the customer's credit history, financial statements, and other relevant information.
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Once the company has determined that a customer is creditworthy, it can then extend credit to that customer, establish a payment period, monitor the collections, and if necessary, take steps to accelerate cash receipts from receivables.
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