An accounts receivable is a short term asset that is turned into cash from the date of sales transaction.
January 7, 2014 (Newswire.com) - Accounts receivable It occurs when a business supplies goods or services to its customers on credit. Management of the accounts receivable is an important segment in handling the cash flow of your business. It begins with the completion of all of the antecedent functions with the receivable posted in the accounts receivable ledger. The receivables start aging quickly thereby increasing the risk of non-payment and the cost of financing them. Hence safeguarding the accounts receivable asset and quickening the cash inflow is absolutely necessary. With efficient accounts receivable management you can minimize bad debts, have lower operating costs and reduce day's sales outstanding.
Uncollectible Accounts Receivable
The most time consuming and frustrating challenges that several companies face today are the huge accumulated balances that interfere with the company's operations. An uncollectible accounts receivable is presented as a contra-asset written off. An accounts receivables manager should attempt to maximize the return on accounts receivable and also decide which customers should be granted credit. A company needs to set a minimum credit rating for its customers to maximize the profit.
Management of Accounts Receivable
Management of accounts receivable minimize the volumes of cash and takes the company back to its original set goals. An efficient accounts receivable management is an effective tool of marketing as it helps to enhance the sales of a company and also to increase profit.
The first and the most important step of the accounts receivable management is invoicing. Though it seems pretty straightforward, many companies struggle to send invoices in a timely manner to their customers or worse the invoices thus sent has incomplete or incorrect information that further delays the payment process. Normally, a professional invoice should contain the following:-
1. Your company's details а Company's name, logo, mailing address with phone numbers, E-mail ID's and TIN no.
2. Customer's details а Client's company name, mailing address, phone nos., TIN number and name of the person handling the account.
3. Product description а Itemized list of products supplied with their rates and total amount including Vat and discounts offered.
4. Payment Terms а Be specific on the payment terms, whether it is 30 days from the date of invoice or immediate. Make sure your invoice lists the penalties for late payment.
Effective Ways to organize your Accounts Receivable Management
1. Analyse your customer history and generate smarter interactive aging reports.
2. Spend less time tracking down customers and more time finding new customers.
3. Customize your workflow by keeping track of your customers and receivables in a whole new way.
4. Speed up the payments by sending powerful reminder letters and keep track of your recovery rates.
5. Improve your cash flow and reduce bad debt losses without losing your customers by improving the performance of your accounts receivable. Get the job done on time, every time.