Evaluation of account receivable collection alternatives with fuzzy MCDM methodology

Abstract

In this paper, we present a fuzzy multiple criteria decision-making (FMCDM) approach to evaluation of account receivable (AIR) collection instruments. By considering the prepayment, the letter of credit (L/C), the documentary collection (including D/A and D/P), and the open account (O/A), the FMCDM approach is for the first time applied to investigate the A/R collection for the microelectronics and optoelectronics industries in Taiwan. According to our results, difference of the ranking preference between the two industries is observed. The ranking in the microelectronics industry is the prepayment, the L/C, the O/A and the documentary collection (D/A,D/P). The preference in the optoelectronics industry is the prepayment, the O/A, the L/C, and the documentary collection (D/A,D/P), respectively. International collection in modern unpredictable global market could be difficult unless firms have taken appropriate collection strategies. We believe that our study provides an alternative for making critical decisions during selecting A/R collection instruments.