Our Chapter 7 discussions will focus on current asset management, tell us your reaction to the following:

Cash flow is an essential part of any business. Each business should reflect on whether it is doing everything possible to guarantee that its clients are paying on time. Additionally, the recovery of business debt can be challenging as well as frustrating, and time consuming sometimes stays ineffective due to the lack of effective management. However, to attract and move the positive outcomes, proper procedures have to be in priorities of most business agendas, which can allow them to predict the early identification of potential bad debts. For example, the process of getting an employee paid on time is key for an effective credit management policy.

Nevertheless, its all about what kind of company has what sort of gross profit. Companies with a low gross profit margin (for example, Booking and Airbnb) cannot afford significant bad debts, and thus they need to have a dynamic risk assessment regime in place. Companies with high gross profit margins (for example, Apple and Microsoft) tend to afford a more stress-free approach to risk valuation. Also, another most prominent aspect for a company to think about is if it has a monopoly or a commodity type of products or services. In this particular case, companies with a large monopoly supplier would use an advantage of commanding terms and conditions of trade than a company with a commodity supplier.

What systems and controls should a company implement to ensure the effectiveness of its credit policy? Please include your thoughts as to why these items are important.