Here is the Scenario that we are to comment on: This week%u2019s Discussion focu
ID: 2376807 • Letter: H
Question
Here is the Scenario that we are to comment on:
This week%u2019s Discussion focuses on Activity 6-2 located on page 240 of your textbook which reads as follows:
The following is an excerpt from a conversation between the office manager, Mark Cottman and the president of Horowitz Construction Supplies, Co., Rosa Mullin. Horowitz sells building supplies to local contractors.
Mark: Rosa, we%u2019re going to have to do something about these overdue accounts receivable. One-third of our accounts are over 60 days past due, and I%u2019ve had accounts that have stayed open for almost a year!
Rosa: I didn't realize it was that bad. Any ideas?
Mark: Well, we could stop giving credit. Make everyone pay with cash or a credit card. We accept MasterCard and Visa already, but only the walk-in customers use them. Almost all of the contractors put purchases on their bills.
Rosa: Yes, but we've been allowing credit for years. As far as I know, all of our competitors allow contractors credit. If we stopped giving credit, we%u2019d lose many of our contractors. They%u2019d just go elsewhere. You know, some of these guys run up bills as high as $60,000 or $80,000. There's no way they could put that kind of money on a credit card.
Mark: That%u2019s a good point. But we've got to do something.
Rosa: How many of the contractor accounts do you actually end up writing off as uncollectible?
Mark: Not many. Almost all eventually pay. It's just that they take so long!
Suggest one or more solutions to Horowitz Construction Supplies Co.'s problem concerning the collection of accounts receivable.
Just Need a good very well worded response to the situation at hand above and the reason behind ny choice. You do not have no font or size, Around 175-200 words will be fine. Thanks
Thanks Tracie
The following is an excerpt from a conversation between the office manager, Mark Cottman, and the president of Horowitz Construction Supplies Co., Rosa Mullin. Horowitz sells building supplies to local contractors. Mark: Rosa, we're going to have to do something about these overdue accounts receivable. One-third of our accounts are over 60 days past due, and I've had accounts that have stayed open for almost a year! Rosa: I didn't realize it was that bad. Any ideas? Mark: Well, we could stop giving credit. Make everyone pay with cash or a credit card. We accept MasterCard and Visa already, but only the walk-in customers use them. Almost all of the contractors put purchases on their bills. Rosa: Yes, but we've been allowing credit for years. As far as I know', all of our competitors allow contractors credit. If we stopped giving credit, we'd lose many of our contractors. They'd just go elsewhere. You know, some of these guys run up bills as high as $60,000 or $80,000. There's no way they could put that kind of money on a credit card. Mark: That's a good point. But we've got to do something. Rosa: How many of the contractor accounts do you actually end up writing off as uncollectible? Mark: Not many. Almost all eventually pay. It's just that they take so long! Suggest one or more solutions to Horowitz Construction Supplies Co.'s problem concerning the collection of accounts receivable.Explanation / Answer
Issuing invoices and regular statements should be a standard part of your credit control routine before a payment even becomes overdue. Once a payment deadline has been missed, quick action to chase debts is essential.
A personal phone call is often the most effective way to chase an overdue payment. With experience, it can be very easy to identify genuine reasons for non-payment and simple delaying tactics.
If there is any kind of problem or dispute, try to resolve it straight away. Persistence and a positive attitude often pay off.
Before starting more formal debt recovery proceedings, it's worth assessing the situation. If the customer is in serious financial difficulties, or if the amount involved is small, you may decide simply to write it off as a bad debt.
Debt collection
Handing problem debts over to a debt collection agency can be a quick and easy way to recover them. You can use a debt collection agency regularly or on a one-off basis.
Alternatively, you can use a factoring service to manage your accounts receivable. As well as chasing late payments, the factoring service helps finance outstanding invoices.
Using a debt collection service can be a less confrontational way of chasing late payments than taking court action. A reputable debt collection agency can chase late payments in a professional manner, without alienating the customer.
There are two ways to effectively manage your team. The first is to assign accounts to resources who are responsible for managing receivables and collection activities for their respective accounts. This is very effective especially if you assign larger accounts to individuals who can focus their efforts on the majority of your receivables. For example, if you have 20 accounts that represent over 50% of your receivables then you might split 10 accounts each to two dedicated credit resources. The remaining accounts could be shared by both representatives and worked on in more of a collaborative, team-based scenario. Some companies also assign primary responsibility to credit representatives based on account geography, customer type, assigned sales rep, product line, or other criteria.