## Monitoring of Receivables
Granting credit is only half the job — receivables must then be monitored so that liquidity is maintained and slow-payers are caught early. Regular tracking is what keeps receivables management efficient and cash flowing.
### Methods for Monitoring Receivables
1. Computation of Average Age of Receivables (Average Collection Period)
Measures, on average, how long it takes to collect a rupee of credit sales. A rising average age signals deteriorating collection efficiency and tightening liquidity.
2. Ageing Schedule
Classifies outstanding receivables by how old each is (e.g. 0–30 days, 31–60 days, 61–90 days, 90+ days). It:
- gives better control by bucketing receivables by age,
- helps predict collection patterns and liquidity trends,
- compares current receivables with past data and with competitors,
- identifies slow-paying customers so corrective action can be taken.
3. Comparison with Past Trends & Other Firms
Analysing receivables over time lets a firm recognise whether sales and collection trends are improving or declining, and benchmark against peers.
> Why two methods? Average age gives a single summary number; the ageing schedule shows the distribution behind that number. A stable average can still hide a growing tail of very old, near-doubtful accounts — only the ageing schedule reveals it.
### Debt Collection Programme
Once monitoring flags overdue accounts, a structured, escalating collection programme is followed:
| Step | Action |
|---|---|
| 1. Monitoring receivables | Regularly track outstanding payments |
| 2. Intimation to customers | Send reminders before the due date |
| 3. Follow-ups via email & phone | Contact customers on the due date |
| 4. Escalation & legal warning | Warn overdue accounts of potential legal action |
| 5. Legal action on overdue accounts | If still unpaid, initiate legal steps |
The escalation is deliberately graduated — gentle reminders first, legal action only as a last resort — to protect customer goodwill while still recovering dues.