Receivables Management in Financial Management: A Critical Review of Credit Policies, Collection Practices, and Their Impact on Organizational Performance

Abstract

Receivables management has become an increasingly important area of financial management because of its direct influence on an organization's liquidity, profitability, and long-term sustainability. Businesses regularly give trade credit to consumers in an effort to boost sales and improve their competitiveness in the market, but doing so puts them at risk for late collections, bad debts, and cash flow problems. The majority of the literature currently in publication acknowledges that better organizational performance is a result of efficient receivables management; however, opinions on the best credit and collection tactics vary. Some studies contend that more lenient credit terms improve customer relations and foster long-term profitability, while others support stringent credit policies to reduce financial risk. These contrasting viewpoints imply that managing receivables should be seen as a strategic financial management activity that necessitates striking a balance between profitability, liquidity, and customer satisfaction rather than just as an accounting function. The main theories, concepts, and empirical findings on receivables management are examined in this critical literature review, with a focus on credit policies, collection procedures, and their effects on organizational performance. This review makes the case that effective receivables management requires combining sound financial control with strategic decision-making rather than depending on a single strategy by contrasting previous research, pointing out areas of agreement and contradiction, and highlighting research gaps. The need for more context-specific and technology-focused research to address the changing challenges of receivables management in contemporary organizations is emphasized in the paper's conclusion.