Accounts Receivable Management Research Articles

Controlling Risk in Accounts Receivable Management

In granting trade credit, the credit manager must weigh the expected profit from a sale against the risk of customer default. A common procedure is to sell on credit only to those customers whose risk of default is below some critical level. This procedure does not effectively control a firm's ratio of bad debt to sales. In this paper, formulas are derived for the variance of this ratio under various assumptions regarding the number and size distribution of customers. Knowledge of this variance enables the credit manager to more accurately control his credit losses.

An Application of Heuristic Problem Solving to Accounts Receivable Management

The paper describes a very apparent application of heuristic problem solving to accounts receivable management, namely in the location of lock-boxes. Lock-boxes are post office boxes selected in a company's distribution area in order to minimize the time necessary for the company to collect and to have available the funds remitted by its customers in payment of their obligations. The paper starts with a statement of and solution to the problem of measuring a given set of locations. Next the difficulties with the formulation are pointed out and a heuristic program to reach a satisfactory solution is described. The program is written in FORTRAN IV and is currently being tested.