What is accounts receivable and why is this important to monitor? What are some ways that a business can lose track of this and what are some issues that can occur with accounts receivable?
Accounts Receivable :-
Accounts Receivables are the Sales or Services you have done to the Customer and The Money you need to get for the sale or Service made But hadnt Been received yet.
In normal Course of the Business , Many business Provide Services or Make Sales of the Goods By Giving a Credit.
These Are the Current Assets of the Business.
Many of the Customers are in need of the Goods or Services who have not got cash to pay at the time of The Transaction , So ,Not to loose the Customer ,Business Provide services or Make sale of the Goods On Credit basis , which means , The Customer need to pay the amount within Certain Days..
these are known as Accounts Receivable...
It is Very much important to Monitor the Accounts Receivable Because , Some of the Accounts Receivable May become Bad debts , which is ultimately Loss to the Company..
And Company need to monitor these , as these have to be paid.
The Money business to create the Goods or Provide the services
as likely disappears from the business as You have to pay to the Suppliers and Some of the Expenses related to the Business..
Only when the Business Receives the Accounts Receivable , then only the business can survive in the Competitive Environment.
And Every business need to have Working capital to run the Business , If the Accounts Receivable goes on increasing but Haven't receiving any Money from The Receivables , Business cannot be runned .
Hence , Monitoring the Accounts Receivable is very Important and need to be Analysed Frequently .
Some of the ways the Business can loose track of this are :-
Some of the Customers can default the payment , Making the Business to fall into Losses.
Business May not spare Keen attention to the Accounts Receivable and Forget about some of the Customers and loose the payments..
some of the Customers may become Bankruptcy and cannot pay their Debts..
Some of the Receivables may become Bad debts making loss to the Company.
Issues that can occur with Accounts Receivable :-
Invoice Problems :: If the Customers have got any Problems with the Invoice, they cantpay you the debts..
One of the example of such may the Bank details provided by the Company may be incorrect or Have got any mistakes.
They being sent to the Wrong person by wrong address.
Are they tax exempt and you continue to Charge tax.
Invoice Delivery Problems ::
Are The invoices are delivered withing the time And to thw correct address and the correct person..
Most Business doesn't have a Formalised credit and Collection Process..
They may be working with outdated excell or any Outdated softwares..
Resources problems :
Some of the company's doesn't have enough people working on the Collection of the Accounts Receivable which a major drawback in Accounts receivable Collection process..
Only when Business Focusses and Monitors on the Accounts Receivable and Receives the collections , Busines can run the business , If not Business may go into Liquidation Stage and which is very risk .
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