What is accounts receivable and how to work with it

Table of contents:

What is accounts receivable and how to work with it
What is accounts receivable and how to work with it

Video: What is accounts receivable and how to work with it

Video: What is accounts receivable and how to work with it
Video: Absolute Monarchies 2024, November
Anonim

Organizations or individual entrepreneurs with a non-cash payment system are often perplexed: “What is it: receivables are getting bigger every month, growing like a snowball?” Someone will say that this is good - products (services) are in demand, and with the calculation you can wait a while. But do not flatter yourself - basically, such an increase is a signal that the company will incur losses in the near future. Have you ever thought that some permanent debtors use you as a bank? Those funds that are not paid to you on time are free money for your clients. They send them to other needs, they say, you can wait with payments (no one demands it). And what do credit organizations do in this case? Naturally, they are fined for late payment or interest is charged. So it's time to understand whatreceivables and how to reduce them by taking strict control!

What is accounts receivable
What is accounts receivable

Tips to help reduce accounts receivable

In principle, the entire "receivable" is divided into the following types: normal (the period between shipment (rendering services) and the settlement period under the contract); overdue (the amount was not received on the date specified in the contract) and hopeless (when there is no way to return the funds). And in order not to be in the second and third situations, you must adhere to the following tips. Continuous work with receivables has several stages.

  1. Track debtors weekly with software. Fortunately, computer programs have now been developed that generate reports in a matter of seconds. This allows you to systematically monitor the financial situation.
  2. The sooner you bill, the sooner the money will arrive. In addition, it is desirable for the client to be reminded of the terms of payments. For example, attach a respectful letter about this to the invoice, or you can add this information on the invoice sheet below, highlighting it in bold. The idea of paying on time should be firmly embedded in the memory of the debtor.
  3. Working with receivables
    Working with receivables
  4. An early payment discount system is a great way to encourage customers to pay as soon as possible. This means that you can get a discount of, say, 2% if payment is made within 10 days, while the contract specifies a period of 30 days from the date of issueaccount (and see Tip 2 below).
  5. Constant work with debtors greatly increases the chances of getting money. Letters must be accompanied by phone calls. Of course, reminders should not be viewed as harassment in the first place. Messages should always be polite but firm, ask buyers when they can pay.
  6. Another effective way is to provide for such punishment as pen alties, fines, interest. For example, just look at utility bills or a mobile phone to understand what receivables in the housing and utilities sector and communications are, and also to see what accrual and collection conditions are set there. These companies are extremely efficient in collecting non-payments.
  7. Send the debt to a collection agency if, despite all efforts, the debtor does not pay you off. It's not ideal, but collection firms know what receivables are, how to deal with them, and are very stubborn in "knocking out" cash.

Why do we need a debt audit?

With proper management, constant monitoring of debts works effectively. Most clients tend to pay on time. In addition, it is desirable to check the status of accounts by auditing receivables and payables. Based on its results, the strengths and weaknesses of the company's activities are identified, and appropriate measures are proposed to improve its financial condition. The main audit steps are as follows:

Audit of accounts receivable andaccounts payable
Audit of accounts receivable andaccounts payable
  1. Study of constituent documents, accounting policies of the organization.
  2. Analysis of primary documentation, linking financial documentation with the terms of contracts and prices in force at that time.
  3. Evaluation of settlement documents, comparison with reporting forms.
  4. Determination of the reliability of data in the balance sheet and its applications.
  5. Develop recommendations.

In principle, the area of work with receivables and payables requires only a well-functioning system of organization and control. Set your own rules, then follow them.

Recommended: