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:
Collectibility efforts due to aging
When the collection time increases, the resulting expenses depreciate the receivable and reduce the profit,
ultimately affecting the bottom line revenue.