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Monitoring Accounts Receivable Using Variance Analysis
George W. Gallinger and A. James Ifflander
Vol. 15, No. 4 (Winter, 1986), pp. 69-76
Stable URL: http://www.jstor.org/stable/3665782
Page Count: 8
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This articled shows the credit analyst how to use an accounting-based variance model to evaluate accounts receivable against budget. Dollar variances between actual and budgeted receivable balances are segregated into a collection experience variance, a sales effect variance, and a joint effect variance. The sales effect variance is further segregated into a sales pattern variance and a sales quantity variance. Knowledge of the contribution of each of these variances to the total variance between actual and budget balances provides insights about accounts receivable that traditional measures, such as days sales outstanding and aging schedules, are unable to reveal.
Financial Management © 1986 Financial Management Association International