Recently, Erica Lovell, owner of Erica’s Electronics, decided to allow customers to purchase merchandise on credit. Credit customers will be given 60 days to pay for their purchases. No discounts will be granted for early payment. Erica believes this new policy will increase her store’s sales because her principal competitor in town has a strict cash only sales policy.
Required:
Write a brief memo to Erica describing some of the business benefits of, and problems with, the new credit policy. Include in your memo the non accounting issues that Erica will confront following this policy’s implementation.