![]() ![]() An aging report is a way to determine if a company is doing a good job of collecting bills and reducing accounts receivables.Īlso, numerous vendors, including Oracle, Workday and SAP, sell software for automating management of accounts receivable and integrating the process with an ERP (enterprise resource planning) system. To maintain accurate accounts receivable, payments also need to be applied to the correct customer and precise invoice.Ī company might have a clerk for AR whose duties include tracking accounts to determine if they are overdue, calling customers to speed payments, responding to questions from customers, maintaining accurate records and bookkeeping.Ī company's collections department would use an aging report to track and list unpaid invoices by customers and the time for the existence of the bill, usually in increments of 30, 60, 90 days or more. When payments arrive, receipts need to be returned and the payment needs to be recorded.Ĭompanies need to have meticulous rules for issuing credit and collecting a debt in a timely manner, and they need to keep good data on customers. The AR process starts when a company sells a good or service and includes payment terms, discounts or credit guidelines in an invoice to the customer. Payments of accounts receivable can cut a company's debt, reduce financing charges and improve cash flow, which can be used to hike dividends, invest in Capex (capital expenditure), increase risk capital or offer new goods and services. Importance of accounts receivableĪR is a vital part of a balance sheet because it represents bills that should be paid to a company and could require steps for collection. Accounts receivable (AR) is an item in the general ledger (GL) that shows money owed to a business by customers who have purchased goods or services on credit.ĪR is the opposite of accounts payable, which are the bills a company needs to pay for the goods and services it buys from a vendor. ![]()
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