What should a business consider if Debtors Turnover is lower than previous periods?

When a business finds that its Debtors Turnover is lower than in previous periods, it indicates that the collection of receivables is taking longer than before. In this context, analyzing credit terms and collection strategies is crucial. This involves reviewing the existing credit policies, evaluating whether the terms being offered are too lenient or if customers are struggling to pay their debts on time.

By conducting this analysis, the business can identify any weaknesses in its collection processes or customer creditworthiness. It may lead to adjustments such as tightening credit policies, improving follow-up on overdue accounts, or implementing new collection strategies that may enhance cash flow and reduce the days sales outstanding (DSO).

This strategic approach ensures that the business is not only aware of its current financial standing but is also proactive in addressing issues that could lead to increased cash flow and better management of receivables.