Question

It has been discovered that credit sales have been made to customers with a poor credit rating. If this continues, the company will face increasing uncollectible receivables and losses due to bad debts. Separation of duties between ________ and ________ should help resolve the problem.

Answer 1

The separation of duties between sales and credit control should help resolve the problem of credit sales made to customers with a poor credit rating, reducing the risk of uncollectible receivables and losses due to bad debts.

Step-by-step explanation:

The separation of duties between sales and credit control should help resolve the problem.

When credit sales are made to customers with a poor credit rating, it increases the risk of uncollectible receivables and losses due to bad debts. By separating the responsibilities of sales and credit control, the company can ensure that sales decisions are not influenced by credit considerations and that credit decisions are made independently without the possibility of favoritism or bypassing credit checks.

For example, in a company with proper separation of duties, the sales team focuses on making sales and generating revenue, while the credit control team assesses creditworthiness and establishes credit limits for customers. This separation reduces the likelihood of extending credit to customers who are unlikely to pay, reducing the company's exposure to bad debt.