How do the collection policies of a firm affect their investment in terms of receivables? (500 words)

- Credit standards: The tighter the credit standards will make them [banking institutions] less prone to the losses of bad debts which subsequently lower the receivables balances as well. Easier credit terms bring up sales while at the same time increase debt level and consequently - risk, thus requiring a higher rate of receivables.

- Credit period offered: Prolonged credit to customers' results in the increase of the financial outlay and plough back planned towards these receivables. Short-term credit services saves cash flowing into POS as a result of outstanding loans.

- Discounts for early payment: Giving 2% discounts 10 Net 30, will work toward ensuring early customer payments and fast recovery of due. The cash discounts help to decrease the amount of such investments.

- Collection efforts: Operating good collection departments and practices greatly helps achieving collection of debts in a timely manner, reduce the number of delayed payments and lower the level of funds that are tied. Up to date news, active feeds, and recourses for learning dining options are provided in a way to give you true food safety.

Briefly, strict terms of credit and collection procedures not only keep the value of customers receivables lower but also ensure the proper management of funds. It compels the cash flow to speed up, thus making the working capital accessible earlier for investment purposes. Indulgent policies augment revenues but simultaneously boost expenses on debtors which creates a requirement for the government to incur more loans to cover up these costs. The businesses should be setting the right priorities and be aiming for the appropriate balance between these objectives.