Accounting Best Practices
A company offers products
and/or services to its customers to generate sales. The
transaction takes place when the customer buys the goods and/or
services at the price and conditions agreeable to both parties.
Generally the transaction is completed when the customer pays
after taking delivery of goods and/or services.
However in cases where there is
a long-standing relationship between the company and a customer,
the buyer may make payment at a future date. This also takes
place when the two parties have a payment agreement.
The invoice as presented to the
buyer and that transaction, which is recorded, is referred to as
accounts receivable. When the customer pays his invoice, his
account is credited with that amount. The accounts receivable
ledger records the details of each customer's transactions and
Since more and more companies
are entering into a transaction with the customers by offering
credit, managing accounts receivable can pose serious financial
problems for a company if not efficiently managed. For instance,
a receivable that remains unpaid for a long time can turn into a
bad debt. At the end of the financial year, the total sum of
accounts receivable is calculated. Applying discretion,
uncollected invoices from the past 365 days (or as deemed fit by
the company) are excluded from accounts receivable and
classified under bad debts. The total amount thus arrived at is
treated as a current asset on the balance sheet of the company.
Finally, an accounts receivable
department should have a goal structure for each team member.
Accounts Receivable Management
Like all management
practices-sales, customer relationship and others-accounts
receivable management is an integral one. Forming and
implementing proper marketing strategies are an important to a
company's overall reputation. The actual sales and invoicing
construct the ideal base for development and growth.
However, it's important to
ensure that that AR management energizes the profitability
factor of the company thereby fortifying production, research
and development, distribution and proper financial position,
leading to profit generation and growth.
An inefficient AR department
could submerge the company's bottom-line or worse still it could
stagnate the pace. Good accounts receivable management keeps
money flowing-the ideal AR management policy is to make sure
that it does. Invoices must be sent and payments collected on
time. If difficulties occur that impede the money flow,
management must step up and identify and rectify the problem.
The customer may not be happy
with the products or services or simply delinquent. Once the
reason is discovered, proper action should be immediately
initiated. If at all possible problems should be solved
internal, however, if external assistance is required, the
source should always be appropriate and reputable Finally, the
best accounts receivable management provides a smooth running
It should be noted that
concrete financial goals should be in place when managing an
accounts receivable team. Each member of the team should have
his or her own set of monetary targets - for daily, weekly,
monthly, and sometimes even hourly goals. This ensures that
everyone is on track, and gives people a tool with which to
Accounts Receivable Job Description
In business it's vital to
maintain a cordial relationship with the customer in order to
grow and get ahead of the competition. While it takes a lot of
care on the part of production division to create cutting edge
products or services, it's up to the marketing division to
create the market for those products or services. Finally, it is
extremely important for proper follow-through to take place -
even if that means chasing down people who owe the company
A mishap or misunderstanding in
attempting to collect receivables can adversely affect a
company's reputation. That said the accounts receivable team
perform a valuable function make significant contributions to
the company's survival and growth.
It does pay to understand and
follow certain guidelines. Job responsibilities include keeping
an up-to-date billing system since inaccuracies result in
collection errors. Keeping a check on monthly receivables
activity while making sure that that billing, collection, and
reporting activities are carried out per specified dates.
Looking into and researching customer account details, which
include non-payments, delayed payments, and other
irregularities. Creating an appropriate communication system
that reminds the customer about payment without offending them.
Last and most importantly, creating a recovery system while
sourcing its strengths internally or identifying an external
source for faster recovery at minimal expenses.
The communication can make use
of telephone calls, post mail, email, and so on. The language
should never sound bullying, but it should sound firm, and it
should state all the facts. The person who owe money may even
appreciate the service of being informed exactly how much they
owe and for what. This helps them in their own personal
Accounts Receivable Collection
Every company follows its own
credit policy set by management. For some the credit period
offered to the customer is a week while for other organizations
it could be as long as a month. Problems start when payments are
not forthcoming within the time agreed upon. This is when a
company has to initiate the accounts receivable collection.
Quite simply, it is the act of
gathering payments for past due invoices, which is necessary in
keeping a business running smoothly. Since a company expects
payments from its customers, similarly it has to make payments
to other companies or individuals such as creditors (for goods
and/or services) or everyday expenses including interest, rent,
Accounts receivable collection
is as necessary to a company's smooth operation as sales and
marketing are for its survival and growth. By and large, the
process of accounts receivable collection has to include the
following. The collection process should initiate immediately as
the credit term ends. If the credit terms include last interest
fees the exact amount of interest should be collected. Suitable
practices should be employed for collection, which includes
communicating with the concerned person regularly until dues are
settled. However, discretion should be applied in all
communications so as not to diminish a company's image or its
relationship with customer.
The actual process of
communicating with the person who owes money includes, but might
not be limited to, telephone contacts, emails, post mailings,
and so on. The accounts receivable expert should always be
cordial when talking with a customer.
Accounting Management Best Practices Training Course Subjects:
Costs, Expenses and Revenues. Profits and Loss.
Break-Even Analysis. Assets and Liabilities. The Balance Sheet. Stocks,
Shares, Bonds Earnings and Dividends. Shareholder's Equity. Cash Flow. Debt
Control and Debt Collection Period. Taxation. Financial and Performance
Ratio Analysis. Public Companies and analysis of annual reports. Decision
Making Using Managerial Accounting, Audit and Internal Control, Earnings Per
Share EPS, EBITDA, IAS International Accounting Standards, GAAP.
Training Workshops: Management Accounting Course
in Las Vegas, USA
Planning, controlling and auditing
Management Accounting Course - Online Distance
Planning, controlling and auditing