Hello! All,
A company has Rs. 20 crores annual turnover for the past 3 years.
For the same period the monthly Overdue Receivables from their customers is about Rs. 3.30 crores consistently.
On their Invoice the credit period is given as 30 days and delay beyond this duration will attract 18% interest rate.
Can you please let me know:
1. How many days (i.e., 30 days or 60 days) of annual turnover amount this company can afford to allow as credit?
2. At least 35% of annual turnover amount is required to procure their raw material. Considering this is it viable for this company to extend Rs. 330 lacs as credit on monthly basis
3. Beyond how many days this company should consider calculation of interest on the outstanding receivable amount
4. If there is best practices URL or knowledge base, would appreciate you sharing the same
Thanks and Regards,
SamSue
CAclubindia
