Accounts Receivable is an amount that is due to your company for goods and services delivered to the customers on credit. So any amount of money owed by your customers for their purchases is put up in the Accounts Receivable section which is counted under assets.
Each of your customers has a specific period before which they have to pay the amount for the invoice received and as the amount is received it is reduced form Accounts receivable and is placed under the cash section. The due period is usually short and can range from days to a year based on the business cycle of the company.
The term Accounts receivable is a compliment to the term Account Payable about which we have already discussed in length here. To better understand both the terms, below is an example for you.
Example for Accounts Receivable:
Imagine you own a meat supply business where every day you drive your supply van to deliver your day’s orders to a restaurant. So being a veteran meat supplier, you do business with your client on an account basis. That is you supply your meat every day and give a specific amount say 30 days to your client to pay you.
So while the restaurant gets say Rs 10,000 of your supplies every day, you give him an invoice of the supplies and when you return to your office you write each days amount under accounts receivable section i.e. the amount owed to you by your client for meat supplies you allowed the customer to purchase from you on credit basis.
This exact amount is written under the Accounts Payable Services section of your client which is the amount he owes to the goods and services (meat supplies) in the form of credit. When the balance statement is drawn, your accounts receivable is placed under assets, and on the restaurant’s balance sheet, the payable amount is placed under liabilities. When the client pays you the money he owes, you put the amount received under cash and reduce the account receivable section by the same amount.
The Importance of Accounts Receivable Services:
As you might have already guessed, Account Receivables indicate business and its cash flow. It is the most crucial factor in a company’s working capital and factors like days payable, current ratio, and others. Having a high Accounts Receivable might indicate good business on paper but it also may reflect that you are too laid back in collecting the money which impacts your cash flow and you will be struggling to raise cash for your business operations. If it’s too low it is possible that you are not offering the right terms are probably harming the customer relationships.
As you have seen the example, the total Accounts Receivable process may seem like a simple process that can be handled by anyone but it is not. As your company grows in s business the whole process of managing a variety of accounts their timelines, avoiding past dues, collecting the present dues, managing uncollectable receivable, checking the creditworthiness of the customers and handling everything without breaking the cash flow can be a difficult task without help from Accounts Receivable Outsourcing agencies like Back Office Accountants.
Our Outsourcing services of Account Receivables at Back Office Accountants help our clients deal with all the crucial financial functions that influence an efficient Accounts Receivable process with ease.
At Back Office Accountants we offer a wide spectrum of Accounts Receivable Services that lets you seek help for all or only a particular section of accounts receivable process to help you with optimal cash flow.
Here are some of the key benefits to businesses when they outsource their accounts receivable services to our team of professionals at Back Office Accountants:
Reduced cost and saved time:
As businesses outsource accounts receivable functions, it naturally frees up their employee work hours and time they spend on the resources while adding expertise along the way. You can easily get all your crucial accounting business done with high efficiency at an affordable budget saving you time, money, and also the headaches.
Helps you chose the right customers:
The most important and often ignored step in setting up a credit account with the customers is checking the creditworthiness of the customers. With so many customers it may not be practical to perform stringent checks of credit history and gauge their worthiness. As you outsource accounts receivable services we can perform this step efficiently giving a solid base for your accounts receivable process in the potential future.
Streamlines whole accounts receivable process:
We streamline your entire process with timely electronic billings and processing, handle all your payments done through multiple channels ensuring a smooth cash flow without any fluctuations. .All while all this is being done, you can concentrate on your core businesses.
Boosts business efficiency:
With solid background expertise in the accounting field and having worked with thousands of businesses, we exactly know makes your accounts receivable process quick and efficient. Our accounts receivable experts bring a superior skill set for efficient credit collection and extension with deep knowledge of client relationships. It is always the whole package that boosts your business efficiency by optimizing your cash flow and working capital.
With outsourced Accounts Receivable Services, you spend less time & cost while bringing an expert team of professionals who can boost your business efficiency while you concentrate on your core business. Want to outsource your Accounts Receivable process? Then why wait? Contact us at Backofficeaccountants.com.