Final answer:
The effective management of accounts receivable involves reviewing the credit history of new customers to assess creditworthiness and minimize the risk of non-payment. It also incorporates maintaining clear payment terms, much like personal financial management involves paying bills on time and managing credit use wisely. Activities such as prompt cash payments to suppliers or refusing bank-issued credit cards, however, are not typically associated with managing accounts receivable.
Step-by-step explanation:
The effective management of accounts receivable requires financial managers to primarily engage in a few key activities to ensure that the cash flow of a business is maintained and credit risks are minimized. One such activity is to review the credit history of new customers before extending credit. This helps in determining the creditworthiness of potential clients and aids in mitigating the risks associated with non-payment. Financial management does not typically involve providing prompt cash payments to suppliers in the context of accounts receivable, but rather in the context of accounts payable management. Additionally, allowing customers more time to pay their past due accounts could potentially aggravate credit risk rather than manage it effectively. Refusing bank-issued credit cards is not generally a part of effective accounts receivable management, as it could limit the methods of payment available to customers, potentially reducing sales.
Helpful measures for managing personal finances, such as balancing a checkbook regularly, do echo the principles of managing accounts receivable by keeping abreast of cash flow and avoiding the incurrence of unnecessary fees. A company's credit policies can be improved by setting clear payment terms and adhering to them, much like individuals are advised to pay bills on time and use credit judiciously. Banks, as financial intermediaries, also manage risks similar to those of businesses managing receivables; they prepare for defaults on loans to some extent but strive to maintain a positive net worth by carefully assessing the risk of loans and other assets.