What does an increase in crediting time allowed to customers mean when there is no increase in sales?

The Correct and Best Answer added by: Mohammed Qasem  Auditor 10 days ago

 

Means that there are other problems with customers and not the credit period, the company must resolve, because with the continuation of this policy, the company will be exposed to a financial crisis in the future, as a result of rising inventory and low collection, that is the period of cash is long, In which purchases are converted into cash.

Its big mistake to solve the result instead of the problem and in this case the company will lose part of its valued resources While it can save when the management perform SWOT Analysis.So the risk of decrease in sales could be result not a problem it self and example of the problem is the type of product or customer demographic locations or it maybe from the quality, or shortage in distribution channel and so many probable reason and only accurate risk assessment and SWOT analysis management will decide to in crease the sales by solving above issues and not direct un clear expectation the management decide to increase the limit period or balance limits because basically if this is not the root cause of the decrease on sales then no result will came and only lost sales and gave indirect cash loan