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Did you know each dollar in your 90 day past due column is worth just 73 cents!
Account receivables are not generally considered as a "depreciating" company asset. Their impact on net profit, however, is directly related to the margin of expense required to replace and collect them.
According to a study conducted by the United States Department of Commerce, Bureau of Statistics, financing costs are required to manage and replace cash flow. They include:
Administrative expense
Billing expense
Collectibility efforts due to aging
Inflation
Maintenance expense
When the collection time increases, the resulting expenses depreciate the receivable and reduce the profit, ultimately effecting the bottom line revenue.
