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 payments received.

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.

Accounting Management: 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 organization.

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 measure success.

Accounting Management: 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 money.

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 accounting.

Accounting Management: 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, and salaries.

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, emailings, post mailings, and so on. The accounts receivable expert should always be cordial when talking with a customer.

Accounting Management: Accounts Receivable Process

The process of accounts receivable starts when products or services are provided to a customer on credit. The company that details the transaction including the total amount and duration of credit creates an invoice. The invoice is then recorded.

If payment is on time the accounts receivable process ends there. However, often this is not the case. That's when the collection department takes over. First, the customer is afforded the opportunity to explain the delay. If there's a complaint regarding products or services, the matter is forwarded to the respective departments. Once the issue is resolved and payment is received the process is ended. Sometimes the process will end if the product is shown to be faulty or not up to the customer's expectations, at which point the debt may be expunged or reduced. This may or not be the case with your company or the company your represent.

Some companies prefer to hire an accounts receivable outsourcing firm. These firms take over the process of collecting overdue payments in a professional manner. A certain amount of fee or commission is charged for successfully completing the process of collection. In some extreme instances, a customer goes bankrupt and simply can't pay in which case the debt is transferred to the bad debts account from accounts receivable.

The bad debts account will stay on record, but the company may or may not ever be able to collect on the debt. Some debts are lost causes, and those losses must be cut so that the system does not get bogged down.

Accounting Management: Accounts Receivable Software

The world has gone digital. And why not, with all the inherent benefits of information technology. Businesses have taken advantage of the digital revolution with computers making work a lot easier. Computer accounting is one such area that has transformed the business process.

The effect can be seen in how financial details are organized and managed. From the time a transaction takes place, all the details are processed and stored on the computer. The effect not only continues till the balance sheet is completed but it gets carried forward to the next accounting year in many cases.

The accounts receivable stand-alone software applications or accounts receivable module offers significant benefits. Today, it's possible to manage all sales transactions easily and efficiently using accounts receivable software. Simply key in the customer's information and the credit transaction and the software takes care of the rest.

It starts by giving unique invoice number to the transaction. The customer account is debited with that particular amount. It reminds when the payment is due. At a single glance, details can be viewed and attended to. This makes the process of accounts receivable easy to handle. What's more, the software centralizes the process, which frees up staff for other responsibilities.

Any authorized official at the company can view the transaction or customer details and stay informed. A host of software applications are available in the market with varying features. Most of them have been designed to seamlessly integrate with the company's existing platform. When compared with advantages they offer, the cost of these applications is negligible and proves to be cost-effective over a period of time.

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Accounts Receivable provides detailed information on accounts receivable, accounts receivable process, accounts receivable collection, and more.