Information On Accounts Receivables
It is a common practice in the business world to sell products on short "interest free loans" commonly referred to as Accounts Receivables. Accounts Receivables, more generally, are one of a series of accounting transactions dealing with the billing of customers who owe money to a person, company or organization for goods and services that have been provided to the customer. Most companies typically do this by generating invoices and mailing or electronically delivering them to their customers, who in turn must pay it within an established time frame called credit or payment terms.
A common payment term is Net30, meaning payment is due in the amount of the invoice 30 days from the date of the invoice. Other common payment terms include Net45 & Net60 but can be for any time period agreed upon by the vendor and client. While booking a receivable is accomplished by a simple accounting transaction, the process of maintaining and collecting payments on the accounts receivables can be a full time occupation. Business organizations which have become too large to perform such tasks by hand or smaller ones that prefer not to do them by hand will use accounting software on a computer to perform this task.
Depending on the industry in practice, accounts receivable payments can be received up to 10 - 15 days after the due date has passed. These types of payment practices are sometimes developed by industry standards, corporate policy, or because of the financial condition of the business. On a company's balance sheet, accounts receivables are the amount that customers owe to the company.
Since not all customer debts will be collected, businesses typically record an allowance for bad debts which is subtracted from the total accounts receivables. When accounts receivables are not paid, some companies turn them over to third party collection agencies or collection attorneys who will attempt to recover the debt via negotiating payment plans, settlement offers, or as a last resort, legal action against the dead beat customer. Outstanding advances are part of accounts receivables if a company gets an order from its customers with advance agreed in payment terms. Since no billing is being done to claim the advances this area of collectible is not reflected in Accounts Receivables. Ideally, since advance payment is a mutually agreed term, it is the responsibility of the accounts department to take out periodically the statement showing advance collectible and should be provided to sales & marketing for collection of advances. The payment of accounts receivables can be protected either by a letter of credit or by Trade Credit Insurance.
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