What does your team recommend and why

Reference no: EM131975330

Question: Your firm has experienced continued sales growth that has been in part due to a more relaxed credit policy. All sales are on account. At the same time that sales have continued to grow, there has been a significant increase in uncollectible accounts.

Two years ago, you led a corporate team that evaluated the benefits of outsourcing your credit sales policy to VISA. Such a move would cost the firm 4% of every sales dollar, but would also reduce administrative and collection process expenditures by .5 % of every sales dollar. Needless to say, bad debt experience would drop to 0.

The corporate team has convened, and you have been provided income statements (including bad debt performance), as well as accounts receivable aging performance for the past five years. You have a number of options to consider, which include (but are not limited to) accepting current collections performance, revising the firm's credit policy (see note on industry sales performance when a firm tightens its credit policy), implementing a tougher collection policy (see note on the impact an aggressive collection policy has on sales and customer retention), and a shift to an outside sales/collections process (VISA).

What does your team recommend and why?

Can you please help me figure this out? This is all the information the professor provided.

Reference no: EM131975330

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