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Accounts Receivable and Debtor Management Services
What is accounts receivable?
What is debtor management?
What is a Credit Period?
An easy way to work out an optimum credit period for a client is their average accounts receivable divided by (net credit sales/days.)
Why Choose Geekbooks’ Accounts Receivable and Debtor Management Services?
Our services include
Accounts Receivable Procedures
Automation and the accounts receivable process
Tips for Managing Your Debtors
Your Questions Answered
Accounts receivable refers to an organisation’s unpaid bills, or the money clients owe the organisation. The term refers to accounts that a firm is entitled to receive after delivering a product or service. Accounts receivable, often known as receivables, indicate a line of credit given by a business and typically include terms requiring payment in the short term.
Accounts receivable are recorded as assets on balance sheets since the client has a legal duty to pay the debt. They are classified as liquid assets since they may be used as collateral to obtain a loan to assist in meeting short-term commitments. Receivables are a form of working capital in a business.
Debt is an unavoidable aspect of running a business. A line of credit, business loan, or credit card for business can assist your firm in hiring new staff, purchasing merchandise, purchasing equipment, and financing expansion. However, too much debt might obstruct your company’s goals and become an unsustainable burden. As a result, debt management is critical to maintaining your credit rating and business operations.
- Calculate all charges Add up the amounts that customers owe for services and products delivered. Essentially, the purchases were made on credit, and the client owes your business on a short-term basis. Every business has a timeframe for calculating their accounts receivable, such as monthly or quarterly.
- Find the average This is achieved by calculating the total accounts receivable amount divided by the number of line items.
- Calculate net credit sales It is the first step in calculating the accounts receivable turnover ratio. Subtract the sales allowances and sales returns from sales made on credit.
- Divide net credit sales by average accounts receivable This is how your accounts receivable turnover ratio is calculated. This percentage offers you a better understanding of how effective you are at collecting money due to the company.
In general, a greater number is preferable. It indicates that your consumers pay on time and that your business is effective at collecting debt. A higher figure may also indicate improved cash flow, a stronger balance sheet or income statement, balanced asset turnover, and even more creditworthiness for your organisation.
A high percentage may also indicate that a corporation is cautious about granting credit to its consumers. Conservative credit practices can help businesses avoid offering credit to clients who may not be able to pay on time.
On the other hand, having an overly cautious lending policy may turn off potential clients. These consumers may then conduct business with competitors who can provide and extend the credit they require. If a firm loses customers or has poor growth, it may be better off easing its credit policy to boost sales, even if it results in a lower accounts receivable turnover ratio.
Multiple unsecured debts are typically wrapped into a single monthly payment under a standard debt management plan.
If you collaborate with a debt management company, the firm may negotiate with creditors on your behalf in order to create a sustainable payment schedule. This plan may include cheaper monthly payments, lower interest rates, or the elimination of certain penalties. In exchange, you may be required to commit to a structured payment schedule that usually takes several years to complete.
You will then make a monthly payment to your credit counselling company. In turn, the organisation will transfer the funds to your creditors in accordance with the payment plan you agreed upon.
A debt management strategy will cost you very little money. You should only have to pay a small one-time set-up charge and minimal monthly maintenance charges after counselling sessions.