Definition of Collection fractions

Collection fractions

The percentage of a given month's sales collected during the month of sale and each
month following the month of sale.

Average collection period, or days' receivables

The ratio of accounts receivables to sales, or the total
amount of credit extended per dollar of daily sales (average AR/sales * 365).

Bank collection float

The time that elapses between when a check is deposited into a bank account and when the funds are available to the depositor, during which period the bank is collecting payment from the payer's bank.

Collection float

The negative float that is created between the time when you deposit a check in your account
and the time when funds are made available.

Collection policy

Procedures followed by a firm in attempting to collect accounts receivables.

Receivables balance fractions

The percentage of a month's sales that remain uncollected (and part of
accounts receivable) at the end of succeeding months.

Average Collection Period

Average number of days necessary to receive cash for the sale of
a company's products. It is calculated by dividing the value of the
accounts receivable by the average daily sales for the period.

collection policy

Procedures to collect and monitor receivables.

Collection Department

An internal department within a company staffed by specialists in collecting past due accounts or accounts receivable.

Risk of Collection

Chance that a borrower or trade debtor will not repay an obligation as promised.

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