Beyond the concern about cash flow, a slow collection of receivables can be an indication of problems such as:
- Customers delaying payment because of dissatisfaction with the product or service;
- Claims or warranty issues that are causing customers to not pay in a timely manner;
- A company credit policy that encourages slow payments (i.e. no penalties for slow payments);
- Customers are experiencing financial difficulties that prevent them from paying, which may result in non-payment or even the loss of such clients should they become insolvent;
- Aged receivables might be uncollectible and an indication that the business has already lost the client; or
- It may be an indication that the business simply has clients that willfully choose to delay payments through no fault of your company, which may mean that they are clients a buyer may not want to do business with.