Company can sell the goods on cash or credit. Cash sale is inflow of cash and it is controlled beneath cash flow analysis. However credit sale makes sundry debtors. Company has to receive money from them. When company begins to sell on return of cash, then it reduces the level of company’s sale and profitability. On other side, when company promotes credit sale, it can raise the risk of bad debts. Therefore, it is needed to control and to manage debtors.Meaning of Debtor management:
It means the procedure of decisions relating to the investment in the business debtors. In credit selling, it is certain that we have to pay the cost of receiving money from debtors and to take a few risk of loss due to bad debts. To minimize the loss due to not receiving money from debtors is the major aim of debtor management.
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