Which one of the following best defines the term 'collection policy'?
A) Process of determining which customers will be granted credit
B) Process of determining the probability customers will not pay
C) Set of guidelines used by a firm to determine the cost of offering credit to its customers
D) Daily process of handling cash inflows and outflows of cash
E) Set of procedures a firm follows in collecting accounts receivable

Question

Quizplus · Accepted Answer

Collection policy refers to the set of procedures a firm follows in collecting accounts receivable from its customers. It outlines the actions a company takes to ensure timely payment, including sending reminders, making phone calls, and pursuing legal action if necessary. Option A relates to credit policy, B refers to credit risk assessment, C relates to credit cost analysis, and D pertains to cash management.

Which One of the Following Best Defines the Term 'Collection