Accounts Receivables
Accounts receivables are amounts which are owed by customers to the companies from whom they have purchased goods or services on credit terms. Once the Invoice is created for a sale and delivered to the customer it is termed as Accounts Receivable. These are usually short term credit which is recorded as a current asset in the Assets side of the Balance Sheet of the Company. This implies that the customer has a legal obligation to pay the company in short term. The terms of sale entails the period for which credit has been offered and the customer has an obligation to pay the money within that period. It's not that accounts receivables financing exists in case of businesses only; they also exist for individuals as there are amounts to be received from the employer in form of Accrued Salary for their services.
In today's business world, Accounts Receivable or Accounts payable exist because business is done on Credit terms. If one house is not willing to offer credit to its customers it is bound to lose sale as the customer will shift to another competitor who is offering credit terms. Likewise, businesses also vouch for suppliers who offer supplies on credit terms. The money owned by businesses to their suppliers is termed as Accounts Payable.
Accounts Receivables are also termed as Trade Receivables or Business Receivables. This is very important for the efficient functioning and growth of a Business Enterprise as it impacts the financial strength of the company. The latest trend in managing Accounts Receivable is to outsource them to professional companies. By outsourcing these, the company is benefited by efficient management of their debts, timely collection of payments, maintenance of proper records such as Accounts Receivable Aging and other statements. Other activities which are taken care of by the professionals are preparation of bills, dispatching it to customers, incorporating them into future Receivable Accounts, Maintaining ledgers, collecting payments from the customers, Applying payments received to Company's Account and resolve matters related to late payments or short payments.
There are numerous benefits attached with Accounts to be received outsourcing. Some of them are - increased cash flow by regularizing debt collection, minimizing bad debts and funding of invoices. Availability of reports and statements related to Trade receivables along with their detailed aging analysis. Since the company does not have to employ a fully operational debt collection department there is enough cost saving in capital and revenue expenses. Since there is a utilization of pool labor the cost is minimized. There is better efficiency in business and client servicing as professionals are engaged with a problem saving approach. Accounts receivable financing or factoring is also becoming a latest trend in the modern business world where Invoices or accounts receivable are discounted for cash against discounting charges thus providing ready cash for expansion and working capital of business. Accounts receivable management will continue to exist in all businesses as there is increase in credit facilities in all trades and we can not think of doing business on cash terms no more. Effective management of Accounts Receivables plays an important role in overall growth of business. Accounts receivable factoring will be discussed in a different article.
Invoice Factoring Privacy Policy
|