Accounts Receivable Process
Steps Involved In End To End Accounts Receivable Process
If you want to effectively manage your accounts and financial assets, end to end accounts receivables process can do it for you. All you need is to have skilled and trained accounts and finance team that knows how to use it for effective and profitable results.
Are you looking forward to receive payment from the customers? Get it done through end to end accounts receivable process. This process is used to manage the cash inflow and collection for the goods or services sold in the business.
What your Finance and Accounting team should be good at?
For the effective handling of end to end process, it is important that your finance and accounting teams knows the keys to handle each and every step efficiently. They should also have the capability to collect payments on time and the creativity to develop the latest strategies. When it comes to the best practices of maximizing the cash flow, they should always be upbeat. Along with this, they need to have thorough knowledge of all the aspects of end to end account receivables, contact administration, cash application, collections and credit management, all to be able to control in a holistic manner.
Results of certain researches have revealed that receivables constitute 2/5th to 1/3rd of the total balance sheet, which most companies are unable to manage effectively. Even though risk management significantly affects the foundation of all the businesses regardless of their domain, segment or any other factor, it is not given much importance.
Why end to end accounts receivables process in important?
The End to End accounts receivables processes are actually important because they affect the entire cash flow of an organization. Furthermore, they can also become a bottleneck for the entire ledger and bookkeeping processes. Thus, it is often preferred that business is constantly monitored for any change occurring in between.
This end to end process includes multiple steps:
Credit Decisions – In this step checking takes place whether the prospective customer has sufficient credit or not to get the products or services supplied to him under an account arrangement.
Bill Distribution and Billing – Once the services or goods have been provided to the client then this step is being followed. Usually the customer makes the payment once the invoice has been generated, but at times payment is also done when they are ready to do it.
Receipting, Allocations and Reconciliations – An AR officer handles this process and identifies the payment that is deposited into the supplier’s bank account. After identifying, they receive it into the system, and assign the payment to the relevant invoice. Following that this is the reconciliation to ensure that it is the correct payment.
Collections – All the unpaid or short paid invoices are identified by the collection officer at any given date. It also includes sending reminders and receiving the payments from the customer, as and when, or as per the company or business policies.
Management of Disputes – If the clients or customers dispute a bill or an invoice, then this step is typically managed between the collections officer and the customer(s). However, in some businesses, largely B2C models, there can be a team of dedicated dispute handling as well.
Bad Debts - Any debt is observed for a certain time frame or date. If the debt reaches beyond this debt and/or is disputed and no mutual resolution is agreed upon (to the satisfaction of the supplier), then it is put into the bad debt category.