- June 25, 2013
- Posted by: Rayvat Accounting
- Category: Accounting
Account Receivable Management
The first question which comes in our mind that what is Accounts Receivable Management and why it’s needed in any company or any organization? I can give you the answer. Account Receivable is the money that is payable to you by the customers you have for the services or supplies. It is created when a customer’s purchase any of the service or goods the company have and they do not pay the money at the time of purchase. In the other words we can say that the company has the sale of a service or any kind of products without collecting the payment buy the customer. The company who has accounts receivable asset has issue the invoice for their products later on. So it might be create the problem to receive the money from the customers and the account department might be in risk of any of the company.
But on the other side accounting for receivables collections will be recorded in any kind of business and it might be beneficial to the company. Once the invoice is sent to the customer, they have to do the payment within 30 or 60 days. If the company has too many accounts receivable, the company may not have that much of cash it needs to pay day by day bills. It is very important to maintain the Accounts payable services for the strong business.
There are three characteristics which we consider in Receivables management for your business and that is economic value, the element of risk and the futurity. You should carefully analyze the element of risk. We can say, in the cash payment there is no risk but in the credit payment, the chances of risk may be increased.
There are many factors that affect the account receivable management and they are given below:
• The terms and conditions which is used to while giving the credit payment to the customers
• The credit sales volume
• The policies and the practices the company have for their customers
To maintain the Accounts Receivables for small business, it is mandatory to follow each customer on daily basis. The person who handles this department has to call the customers and remind them about the invoices and the payment left by them. To do this kind of process you will get the payment early than expected and it may not harm the profit of the company. Therefore you have that much of cash on the hand when you will have to pay it to your vendors. So it has some advantages as well as disadvantages also.
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