Determination of Credit Terms:-
The second feature of receivable management, subsequent to setting the credit standards and assessment of credit worthiness of the customers, is the purpose of the terms on which credit will be given. Credit terms are the terms which narrate to the repayment of the amount of credit sale. There are 3components of credit terms namely:-
(i) Credit Period: - Credit period is the time phase for which credit is extended to the customers and after which they must make the payment.
(ii) Cash Discount: - To push the customers for prompt payment cash discount may be offered by the firm. Customers can take benefit of cash discount by paying amount within the period of cash discount.
(iii) Cash Discount Period: - It is the period within which cash discount is available