Examine the five steps to managing accounts receivable.

Question:

Examine the five steps to managing accounts receivable.

Accounting Receivables:

Accounts receivables refer to payment claims that a business holds for suppliers who have ordered goods and services but have not made payments. They are treated as current assets.

Answer and Explanation:

The steps embraced by a business in the management of accounts receivables include:

  • Evaluating the financial as well as the credit history of a business. The step helps to determine whether a client deserves to be offered credit or not, depending on his history.
  • Setting clear terms of payments. It entails documentation about how payments should be made. Important to note, a business should not sacrifice its profitability while making or negotiating payment arrangements.
  • Preparation of an itemized invoice with detailed terms of payment. It is advisable that businesses should use electronic invoicing as they have updated features such as setting of indicators that reflect when clients receive emails.
  • Providing multiple payment methods like electronic transfers to avoid payment delays associated with inconvenient payment methods and reminding customers about payment dates.
  • Partnering with a reliable accounts receivables company. It can also entail outsourcing data collection services among defaulting debtors.

Learn more about this topic:

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Accounts Receivable Journal Entries

from Financial Accounting: Homework Help Resource

Chapter 3 / Lesson 20
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