Managerial Controls of Accounts Receivable: A Comment

Benishay has recently put forward a quality control scheme for accounts receivable which is designed to draw attention to significant departures from existing credit policy and so to facilitate management by exception. I Benishay acknowledges a weakness in his scheme: the proposed control statistics do not clearly distinguish between changes in sales volume and changes in the collection pattern. It is true that, following a permanent shift in the mean level of sales, the control statistics will revert after a few adjustment periods to their prechange levels or their new equilibrium.2 But this is of little help in the case of steadily growing sales or seasonally variable sales. It is not difficult to devise a control statistic which is unaffected by changes in sales volume and which, therefore, unambiguously reveals changes in the collection pattern. The total volume of accounts receivable may be described by the equation