Accounts receivable management and related aspects

Bookkeeping of accounts receivable is still based on the ancient theory that records before giving out. There are various accounting software available for managing your accounts receivable. However, each software is unique, and it may also depend on the nature of the industry you are operating. We can help you in choosing the right software for you. Factors like customer information management, interactive tools, invoicing templates, ease of collection, etc., can be vital to your business.

Management of accounts receivable is essential for a smooth run of the Company’s financial activities. Application of strong internal procedures is required to maintain reliability and credibility of the account balances that directly affect the company's asset and profit. 

Receivable is the most sensitive area after cash that is subject to the risk of overstatement, fraud, error, and the loss of assets for the business. Hence, there is a need to place an active mechanism to monitor the process of approval, monitoring collection, and reporting the accounts receivables' balance in the financial statement. 

The receivables are created due to business activity that transfers the risk and rewards outside of the business. The receivables require continuous monitoring of the collection procedures, estimates of the expected credit losses, and reporting of the good balances in the financial statement.

Account’s receivables can be better managed with appropriate procedural reforms and the application of effective policies to control and monitor individual customer’s account balances. Let’s get an in-depth understanding of the factors that help to manage the function of accounts receivables.

Bookkeeping of accounts receivable is still based on the ancient theory that records before giving out. There are various accounting software available for managing your accounts receivable. However, each software is unique, and it may also depend on the nature of the industry you are operating. We can help you in choosing the right software for you. Factors like customer information management, interactive tools, invoicing templates, ease of collection, etc., can be vital to your business.

Management of accounts receivable is essential for a smooth run of the Company’s financial activities. Application of strong internal procedures is required to maintain reliability and credibility of the account balances that directly affect the company's asset and profit. 

Receivable is the most sensitive area after cash that is subject to the risk of overstatement, fraud, error, and the loss of assets for the business. Hence, there is a need to place an active mechanism to monitor the process of approval, monitoring collection, and reporting the accounts receivables' balance in the financial statement. 

The receivables are created due to business activity that transfers the risk and rewards outside of the business. The receivables require continuous monitoring of the collection procedures, estimates of the expected credit losses, and reporting of the good balances in the financial statement. 

Account’s receivables can be better managed with appropriate procedural reforms and the application of effective policies to control and monitor individual customer’s account balances. Let’s get an in-depth understanding of the factors that help to manage the function of accounts receivables.

Application of internal controls

The application of internal controls can be better managed with the application of certain techniques and procedures. These techniques and procedures include review, approval, setting credit limits, application of analytical procedures, and segregation of duties.

Transaction to transaction controls can be applied as review and approval of the appropriate authority might help to control the risk of fraud and error. The comparison of amount and terms with the benchmark like pre-set limits can further enhance the quality of review and approval. 

The application of analytical procedures can help us to identify the trend and movement of data to identify if a certain action is required against some account balance. Further, preventative controls like segregation of duty can help to prevent an error from occurring. 

Achievement of the business objectives

The receivable management's business objective is to minimize the number of receivable days and collect cash from customers on a timely basis. The most important aspect of receivable management is maintaining excellent working relations with the customers. For most businesses, receivable management is subjective, considering the conflict between the business's interest to collect and the interest of the customer to hold. However, one must exercise professional judgment and professional skepticism to ensure a smooth balance of profitability and liquidity vs. customer management.

Monitoring

Monitoring is one of the essential elements to control the process of receivable management. It helps to maintain the liquidity of the business by a timely collection of the balance from customers. It’s equally important to collect the money from customers as to make sales to them. There is a need to bring some balance in sales and collection depending on the customers' credibility and the extent of business expected.

Reporting

That’s the conclusive aspect of receivable management. Over/understatement of the balance has a direct impact on the profitability of the Company. There has been a recent development in the accounting profession with the introduction of IFRS-9 that changed the write-off model from incurred loss to expected loss; this change seems to bring some more relevancy and accuracy in the process of receivable reporting. 

The smooth run of business needs to collect the cash and keep the customer happy. That requires application of the principles for relationship management, professional assessment of the customer credibility, and overall application of the risk management techniques.