Why Keeping Track of Account Receivables is Important

Good record keeping is a sure fire way to keep the running of any organization smooth and efficient. And in the account department, it is almost am indispensable skill. The account department is the department responsible for the payment of salaries and benefits, giving of loans, collection of loans and balance in general. They also record the company’s receivables.

What are account receivables? Account receivables are an asset class which represent the debt being owed to the company through good and services rendered on credit. This type of receivables are basically the backbone of the company’s cash flow, as they can be used for many things, including running the company and serving as collateral for future loans. One can learn more about how to keep account of receivables from John Abio.

Account receivables are extremely necessary in indicating a company’s value and its ability to generate profit and income for the business. The existence of account receivables is strongly tied to the cash flow in the company and this is very important for the company because

  • Cash flow statement serve as proof of competence of your organisation to investors
  • Cash flow statements help investors compare your business with others
  • It can help to project future cash movements in your company

Account receivables are assets to the company. They represent money coming in. Profit can be determined by adding up all the assets in the company and comparing with the liabilities. If the outcome does not seem so profitable, then it would be prudent to make decisions that reduce the liabilities or increase the assets.

Why it is necessary to follow up on account receivables

The wisest thing a creditor can do would be to keep records of debts. This is necessary to ensure that the creditor does not forget the debtors that have paid and have not paid and the amount being paid. If defaulters are in no short number, then it is almost as bad as giving out company goods and services for free. This impacts the business and reduces the ability to be run efficiently and profitably.

The best way to handle account receivables is to keep track of them doggedly and consistently. The following are ways to make sure that the account receivables do not limit the company’s abilities in any way:

  • Ensure appropriate communication with customers and clients

This helps to make sure that the clients and customers understand the terms of the credit transactions in clear detail. Errors in transactions are frequent and being clear with communication can go a long way in keeping credit terms sacrosanct

  • Ensure receipts of invoice are acknowledged

Checking with customers for receipt of invoices is prudent, as it is possible for these things to get lost in transit

  • Make sure that the procedure of the company is grounded

Determining the process of account receivables record and collection is necessary to keep track of it. A routine should be created and stuck to with very little compromises made if any

  • Record keeping

It is important to document every transaction done for obvious reasons. Good record keeping ensure that contests are rare.

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