How can businesses improve their accounts receivable turnover?

Improving accounts receivable turnover is essential for businesses as it reflects the efficiency with which they collect cash from credit sales. The correct answer focuses on implementing stricter credit policies and faster collection processes, which directly enhance turnover.

Stricter credit policies allow businesses to evaluate the creditworthiness of customers more effectively, ensuring that credit is only extended to those who are more likely to pay on time. This reduces the risk of defaults and late payments that can negatively affect turnover rates. Faster collection processes, on the other hand, ensure that invoices are sent and followed up on promptly, which minimizes the time it takes to convert receivables into cash.

When these strategies are combined, they create a robust framework for improving cash flow and maximizing the efficiency of the receivables process. Enhancing credit evaluation and collection speed enables a business to maintain healthier customer relationships while also ensuring they receive payments more quickly. This ultimately leads to an improved accounts receivable turnover ratio.

In contrast, extending payment terms, reducing credit limits, or increasing the cost of credit could potentially lead to slower payments or deter customers from making purchases altogether. These alternatives contradict the objective of improving turnover, as they may lead to longer collection periods or decreased sales volume, thereby negatively impacting the overall receiv