What are accounts receivable and what is their importance?
One of the main objectives of a company is to guarantee its liquidity. To achieve this goal, it is important that the people who work there have optimal control of the accounts and apply strategies to prevent or minimize some risks. Many people wonder what are accounts receivables and those individuals outside the business world may not know this concept, which is so common in the field. But in fact, what are accounts receivables?
Accounts receivable is, simply, the sums of money that customers owe a company for goods or services. Debts are classified into different types: current, overdue and impossible to collect. It is important that companies have credit and collection policies so that they are not harmed by non-payment of accounts.
Many companies offer their products or services and customers can pay on credit or in cash. Typically, users purchase them on credit and they obtain the product in advance. They have the power to pay what is owed within a period of up to one year.
Accounts receivable show the company the amount of money that has not yet entered it and are indicators of financial stability or situation. It is important to note that accounts receivable refers to money, but it also includes the procedure to collect that money owed, such as preparing and sending invoices to clients, controlling that the invoices were paid, monitoring all unpaid items, and reconciliation of invoices.
Why account receivable is important?
Accounts receivable is a fundamental point in companies because if the people in charge of managing them do it wrong, this action can have unfavorable consequences. This type of account is an accounting record and an asset at the same time because, thanks to them, companies can determine how much future income they will have.
Proper management of these accounts can make the difference and the success of a business because these accounts are an asset and impact cash flow and provide the possibility of meeting company obligations. There is a reduction in the risk that customers do not pay and long-term relationships of trust are fostered with clients who agree with the management.
How is accounts receivable control carried out?
For companies to have true control of this situation, it is important that they classify accounts by customer, expiration date or another point that serves to differentiate them from each other. Organized management reduces the risk of non-payment, improves the company's liquidity and increases profitability. When companies control accounts receivable, they actually evaluate and control the amount of money that users owe and try to collect it through different techniques or tools to meet their objectives.
Some tools to manage accounts receivable
Currently there are different collection tools and strategies for the administration of this type of accounts.
First, the company must have a clear credit and collection policy so that clients know what the way of working is. For example, the company must establish the payment policy, deadlines, and consequences if the customer does not pay.
It is recommended that companies provide flexible payment options so that the customer can find the most suitable one. The most common are checks, transfers and cash.
Then, it is recommended that companies have an updated record of accounts receivable and implement different strategies or alternatives to prevent non-payment action. In this sense, it is important to educate users about the advantages of paying on time.
A great step is the use of automated programs so that they send payment reminders to clients, identify specific risk profiles and reach agreements with users who do not pay on time.
Finally, it is recommended that companies refer those accounts that they cannot collect to agencies specialized in the matter.
Account recovery
This concept is used to define the collections that can be made of the sums owed by the client to the company. This process is carried out thanks to different strategies and tools to remind users that they must pay the debt. Sometimes, it is necessary for the company to negotiate payment or apply new terms and conditions for the client to pay but, at this point, the important thing is that the money enters the company and that the client's credit situation improves for the future.
It doesn't matter if this is a small, medium or large company. It is always important that clients stay up to date with their debts and that the company can meet its objectives without losses or with the smallest amount possible so that these do not affect its normal development.
Policies raised in the appropriate way allow companies to collect owed accounts and reduce the margin of money loss, maintaining healthy administration.