Question

What might be the ramifications, financially and from a marketing perspective, of increasing the accounts receivable lag time?

Answer 1

If the accounts receivable time period is increased there would be an increase in the sales because the customer will be allowed a greater time period to pay off his dues. This is beneficial to the customer since accounts payable is a form of credit for him.

The Other impact of increasing the account receivable time period is that there will be a loss of interest on the amount which is received after a delayed. This is because accounts receivable is a source of finance for the business. Faster the amount received faster it can be invested in the business and this amount can earn as well as save interest.