Working capital is crucial for maintaining operations and business growth. It enables companies to manage short-term obligations and “keep the lights on” while keeping an eye on the long term. Maximizing working capital creates a domino effect of benefits that directly impacts the bottom line.
In a perfect world, all customer payments would be received when they’re due, everytime. Of course, this isn’t the case. This is why many balance sheets include an allowance for doubtful accounts as a form of internal insurance for distressed customers.
Your accounts receivable strategy is likely based around making sure your customer accounts are fully settled in a reasonable time. There are many ways to accomplish this, but ultimately, businesses want to feed their cash flow and fuel growth.