What is a primary benefit of having a strong accounts receivable policy?

A strong accounts receivable policy primarily benefits an organization by improving cash flow. This is achieved by establishing clear guidelines for credit management, invoicing, and collections. When an organization has a well-defined policy, it can more effectively manage its receivables, ensuring that customers are invoiced promptly and that follow-up on outstanding invoices is systematic and timely. This leads to faster payments and reduces the time that capital is tied up in accounts receivable, thereby enhancing the overall cash flow of the business.

While increased employee satisfaction, enhanced product quality, and lower advertising costs can be important aspects of an organization’s operations, they are not direct benefits resulting from an accounts receivable policy. Employee satisfaction may improve indirectly if the organization's financial health solidifies, but it is not a primary aim of an accounts receivable strategy. Similarly, product quality and advertising costs relate more to production and marketing strategies than to managing receivables. Therefore, the most relevant and direct benefit of a strong accounts receivable policy is the improvement in cash flow.