Short Paper: Managing Accounts Receivable
Matthew King
Southern New Hampshire University
Managing Accounts Receivable 2
Managing Accounts Receivable
Accounts receivables, frequently referred to as trade credit, is an essential part of short-
term financing for businesses, especially retail businesses. If a retail store needs to purchase
goods to sell, it can obtain the goods without transacting cash. It can issue a note payable or
account payable, which will act as a placeholder on both parties’ books until the retailer sells
some of the goods to be able to pay the wholesaler. The wholesaler offers trade credit as an
incentive to make a sale or persuade a retailer to make a larger purchase than they normally
would. There are benefits on both ends and potentially a couple drawbacks.
Extending trade credit is recorded on the issuer’s books as an account receivable, which
is an asset. Since it’s listed as an asset, this would increase shareholder value. This value could
be reduced if the cost of the goods sold on trade credit were purchased on an account payable
