The Untold Secrets of Efficient Accounts Receivables Management
Without efficient accounts receivable collection and management system, your business is likely to encounter a myriad of challenges in maintain sufficient cash flow and operating capital. Accounts receivable can be described as a claim which is legally enforceable by a business so as to get paid by clients and customers for the goods or services it has supplied to them.
In the balance sheet, accounts receivables are shown as asset. It is one of the many accounting transactions series that deal with how to bill customers for services or goods which have been ordered by the customer. Accounts receivables departments in Canada mainly use the term sales ledger, which records the total sales made by the business; the money that the business has received for services or goods; and the money that the business is owed at the last day of the month.
You should try your best to collect accounts receivables immediately they become due, and when the task becomes too much for you, seek the help and assistance of collection agency. An efficient accounts receivable management system begins with clear definition of payment terms.
For many businesses, payment must be made within 30 days. This means that the customer should pay by the end of the 30th day from the date of invoice, otherwise the account will become past due. Some businesses offer discount when the customer opts to pay before the due date. In many cases, an interest will be imposed on overdue accounts but this should be done reasonably.
As the business grows and grants credit to more customers, collection of accounts receivables is likely to become an enormous, challenging task and this is where a collection agency should be brought in. The accounts receivables collection agency will undertake the frustrating and challenging role of following up customers who have not paid on time. This will give you adequate time to concentrate on the management of your business.
The good thing with the accounts receivables collection is that the agency will take a small percentage of the amount of money it has recovered. There are many collection agencies in Toronto so you need to do research on your part so as to ensure that you identify one that best suits your needs. You do this by reading reviews and asking references from the collection agency.
You may ask why you need to do all threes before you hire but the reason is very simple. The collection agency is your agent and therefore a principal-agent relationship exists, and you are therefore bound by its actions under the law. You should thus ensure that it fully complies with all the relevant laws when going about its work.
To avoid issues that may arise from unprofessional collection or mismanagement of accounts receivables, you should only deal with are registered and licensed collection agency in your province. It should have the reputation of helping businesses to recover monies owed to them without violating laws or damaging the image of the business in the eyes of the public.