Financial Assignment (Breeze House) Essay Example | Topics and Well Written Essays - 2500 words

Financial Assignment (Breeze House) - Essay ExampleAs a business, the accounts dues atomic number 18 one the companys sources of cash. Accounts receivable is like cash in the bank. It shows up as an asset on the balance sheet because it means foster in the business. (Muckain, 1998)When looking at the budgeted profit and loss statement of the company (see Table 1), the net income of the company is not stable. This means that revenues and expenses that argon incurred for the month are actually revenues and expenses that should have been incurred on a different month. As mentioned, this situation happens because of the long turnover of accounts receivable while the accounts payable are settled deep down the month. However, the practice of the company of maintaining inventory stocks with a lead time of half of the next months demand is commendable, since it is enough to satisfy the demand of the commercialize while preventing over-stocking or under-stocking of inventory.Effective cr edit control is one way of improving the cash flow of the company. A good credit control dust increases sales, reduces bad debts and increases profits. The credit control can also increase the creditworthiness of the company and build confidence in the banks. An effective control system focuses on the accounts receivable of the company. (Brealey, Myers, & Marcus, 2001)It is a practice of companies to allow a delay in payment if it cannot demand cash on delivery. However, the customers promise to pay for their purchases constitutes a valuable asset (Tracy, 2002). As a valuable asset, credit must be managed properly and promptly. At Breeze House, the company has overlooked the importance of managing its accounts receivable such that they incurred losses in the long run and acquired problems with the cash flow.This paper recommends implementing a credit control system for Breeze House. The implementation program starts by using control points