Sample Solution

One of the most important aspects of cash management is the collection process, which involves actively tracking and pursuing payments that are due. Companies must take steps to minimize the time it takes to collect payment from customers while also reducing costs associated with collection activities. There are several strategies available for companies to achieve these objectives.

The first step in improving collections is setting up a systematic process for customer invoicing and follow-up. This can involve sending out regular automated reminders when payments have not been made on time or even establishing online portals where customers can make payments easily and quickly. The goal should be ensuring that all billings contain accurate information and that any corrections or disputes are handled promptly so as to avoid delays in receiving payment. For particularly slow-paying clients, it may be worthwhile to consider offering discounts for early payment or developing flexible payment options, such as installment plans or extended billing cycles . Additionally, having an effective credit policy in place can help ensure that only reliable customers are granted terms and discourage late payers from impacting your business’s operations negatively by allowing you to more effectively manage risk exposure while protecting your cash flow by speeding up collections (Akanbi & Ololade 2019).