If your payment terms are too stringent, customers may struggle to meet them. Your customers are struggling to meet your payment terms.Consider revamping your credit policy to ensure you’re only extending credit to the right customers. The result is “bad debt.” Bad or uncollectible debt occurs when customers can’t pay.
If your ratio is too low, it may indicate that your credit policy is too lenient. If that’s the case, this is a good opportunity to revisit your collection policies and collect invoices past due or late payments. A low ratio, or a declining ratio, can indicate a large number of outstanding receivables.
What is the accounts receivable turnover ratio?