Tch4ng's Flashcard

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How is calculated the financial impact of customers overdue? Options: All overdue are accrued at 100%, All overdue of more than 31 days are accrued at 50%, Overdue of more than 181 days are accrued at 100% and between 91 and 180 days at 35%, Overdue of more than 31 days are accrued at 25 %, between 31 and 90 days at 50%, and more than 91 days at 75%.

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Overdue of more than 181 days are accrued at 100% and between 91 and 180 days at 35%.

Answer explanation

An accrual for late payments is an expense recorded in the income statement to recognize a risk. It reduces profitability and consequently on profit-sharing and has a negative impact on cash flow. Our objective is fixed at 9% of our turnover for EMEA. Reducing payment terms helps to improve business free cash flow and improve DSO (Days Sales Outstanding).