Accounts receivable are what every entrepreneur should remember

Accounts receivable are the amount of liabilities of other organizations to the company. Most often, such relationships arise in cases when an enterprise takes on the sale of products, and the calculation with the supplier produces after the sale. This transaction is reflected in the balance sheet in the second part of the asset.

Accounts receivable are those transferred for sale or sold goods for which money has not yet been returned. Indicators of debt turnover can tell about the financial situation of the enterprise, its stability. The higher the revenue from the sale of products, the more profit the organization works.

The concept and types of receivables include arrears for services, goods and work in cases where the supplier took an advance, or if the transfer of ownership occurred before the end of the payment period. There is also the concept of "overdue accounts receivable". This is when the debt was formed as a result of violation of the terms of the contract.

According to the terms of performance of obligations receivables are divided into short-term and long-term.

Any enterprise must be able to manage this quantity. After all, its effective use makes it possible to increase the profit of the organization.

According to statistics, the fifth part of the assets of a standard production organization is accounts receivable. This suggests that the management of this tool is an important part of the firm's financial policy. The task of debt management is to accelerate the receipt of money from the clientele, reduce the debts for which payments are doubtful or may not be made, the implementation of effective measures for the sale and promotion of goods on the market.

The amount of debt is influenced by the following factors:

Sales volume and component in the volume of sales. The higher the sales, the more, as a rule, the debt.

Terms of settlements with customers and suppliers. Under more favorable terms, given to buyers, receivables become higher. This is due to lower requirements for determining the reliability of the debtor, increasing the maturity.

Debt collection policy. With a greater activity of the enterprise for collection of debts, the balances of accounts receivable are reduced and its quality is increased.

This amount is also affected by the payment discipline of customers.

The system of receivables management can be conditionally divided into two blocks: the company's policy that allows using debt to increase sales (granting a deferred payment under other equal conditions will be more beneficial for the consumer). The second will be a set of measures that are aimed at reducing the risk of overdue or bad debts.

Accounts receivable: identification and instruments to reduce

The most effective mechanism to maximize cash flow and reduce the risk of debt, is the organization of a system of penalties and discounts. Charging penalties for violations of the payment term should be provided for in the contract. Depending on the terms of payment for the goods you can provide discounts. For example, with a 100% prepayment, a 4% discount can be applied, upon the fact of shipment - 1%, with a deferred payment a discount is not provided.

The mandatory part of the management is the motivation of employees in reducing receivables. For example, the sales manager is rewarded not only for the implementation of the plan for the sale of products, but also for the fulfillment of obligations by customers who received the goods with a deferred payment.