What are the main objectives of credit control in accounts receivable?

The main objectives of credit control in accounts receivable focus on effectively managing a company’s credit policies to ensure the financial health of the business. Optimizing cash flow is a critical goal because prompt collection of receivables allows businesses to maintain operational liquidity, invest in growth, and meet financial obligations. Minimizing bad debts is equally important; it involves assessing the creditworthiness of customers and ensuring that credit is only extended to those who are likely to pay on time, thus reducing the risk of uncollectible accounts. Additionally, managing credit risk involves setting appropriate credit limits and monitoring the accounts receivable to identify potential issues before they escalate.

In contrast, increasing product prices, improving product quality, or enhancing employee training, while beneficial for a business, do not directly align with the specific objectives of credit control. These options focus on areas outside of credit management and accounts receivable operations, which are primarily concerned with cash flow, bad debt reduction, and credit risk management. Thus, the emphasis on optimizing cash flow, minimizing bad debts, and managing credit risk encapsulates the true essence of credit control objectives in accounts receivable.