Certified Financial Services Auditor Practice Exam 2026 – All-in-One Guide to Exam Success!

A decrease in accounts receivable typically occurs when an organization improves its collections process, which can be effectively achieved by implementing stricter credit policies. Stricter credit policies mean that the organization will be more selective about whom it extends credit to, reducing the likelihood of customers accumulating unpaid balances. By evaluating customers' creditworthiness more rigorously, the business decreases the risk of bad debts, leading to lower overall accounts receivable.

When customers know that credit is harder to obtain, they may be more inclined to pay their bills promptly to maintain their creditworthiness with the company. This proactive approach often results in shorter payment cycles, leading to a decrease in accounts receivable as payments are collected more quickly, decreasing the outstanding balances owed to the organization.

In contrast, the other options do not directly contribute to a decrease in accounts receivable. For instance, raising prices could lead to increased receivables if customers cannot pay the higher amounts or if fewer customers are willing to buy. Increasing customer orders can potentially increase accounts receivable unless offset by faster collections. Offering more favorable payment terms is likely to encourage customers to purchase more on credit, which would typically increase accounts receivable rather than decrease it.