How Does AR Performance Impact Cost of Credit?

Accounts Receivable (A/R) performance significantly impacts the Cost of Credit by affecting the efficiency of credit management and collections processes. Improved A/R performance, with reduced overdue balances and faster collections, lowers the cost of credit by minimizing the need for financing and reducing the risk of bad debt. Conversely, poor A/R performance, characterized by high levels of delinquencies and slow collections, increases the cost of credit due to higher provisions for bad debt and increased borrowing costs.

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