CPIM Practice Exam

How can billing and collecting costs be lowered?

1. By increasing the number of transactions

2. By optimizing the number of shipments

3. By negotiating fixed payment rates

4. By hiring external accounting services

The correct answer is: By optimizing the number of shipments

Lowering billing and collecting costs can be effectively achieved by optimizing the number of shipments. This approach streamlines the logistics process, which can often involve significant costs related to invoicing, payment processing, and shipment handling. By reducing the number of shipments through optimization, a company can consolidate orders, thus lowering operational inefficiencies and reducing overall transaction costs. Optimizing shipments might include strategies such as grouping orders or taking advantage of bulk shipping discounts. This not only minimizes the frequency of billing activities but can also lead to improved cash flow and reduced administrative burdens. When fewer transactions require processing, the associated costs of billing and collecting can be minimized, contributing to a more efficient financial workflow. In contrast, simply increasing the number of transactions can lead to higher billing and collecting costs, as each transaction incurs processing fees and administrative efforts. While negotiating fixed payment rates and hiring external services can have their benefits, they may not directly address the efficiency related to the volume and frequency of transactions involved in shipping, which is a key aspect of cost reduction in this context.