p> It would be relatively easy to design a credit policy that helps Lawrence to minimize accounts receivable while increasing sales revenue. Unfortunately, as mentioned previously, the most significant and problem facing Lawrence in this area involves the fact that Mayo represents over 80 percent of Lawrence's annual sales revenue. As a result, there is only a limited amount of pressure that Lawrence can bring to bear on Mayo to accelerate cash inflows even when invoices are past due. The risk for Lawrence is that Mayo will retaliate by reducing its purchases in response to efforts made by Lawrence's credit and collection department to accelerate cash inflows notwithstanding the fact that the invoices in question are undisputed and past due.
Most commercial credit departments would have the option of placing a delinquent customer on hold. The credit hold would be released either upon receipt of payment or upon receipt of a reasonable commitment for payment. The catalyst for the current cash flow problem is that M
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