Dear all.how to better manage your accounts receivable. ?

Critical to the management of accounts receivable is establishing a strong policy.

The overall process must include these key aspects:

·         Establishment of standard terms and conditions – this information must be communicated both internally and externally

·         Credit application and approval                 - For example How long is the credit approval process going to take?

·         Customer set-up in the system - Certain key data must be obtained at this point to insure success in the billing and collection process for example the complete shipping and billing addresses and customer contacts.

·         Order entry and review- for example the orders should never be accepted contractually until credit approval has been completed.

·         Shipping release- For example establishment of how and when products will be shipped.

Reporting is a key aspect of an organizations ability to manage AR.

1.       The establishment of targets for each area of AR performance that can be based on best practice performance – available through benchmarking sources.

2.       The generation of an overdue report for management

One of the fundamental issues related to overall receivables management is the impact that improved collections has on overall cash availability. Internally generated cash is by far the cheapest form of financing and the impacts can be significant.

Based on my loacal experience, you better manage your AR by actively tracking your your collections. There are other issues like issuing correct invoices at correct times to the right people but monitoring collections is the main issue here.

I Think you must adopt first ( Aging Report ) which help you to classify all accounts receivable you have .

and then you must use some analysis ratio like ( account receivable turnover & Days sales in Receivable ) which indicate if the current credit policy is working or you need to ( tighten or extend ) based on analysis .

you must also monitor you ( Bad Debt ) to improve efficiency of collections .

In my opinion, AR system is effective if properly managed at

1. Recording Level (Invoicing and reciept)

2. Reporting Level

Good Data collection (e.g. name of sales rep etc) and Basic control checks at recording level, will avoid any mistake / error... e.g. wrong product cost, discout rate, corporate discount etc.

Reporting of AR, should be comprehesive and be able to broken down is smallest segment (e.g. By Region/ By Zone/ by Route / By Sales Manager / By Supervisor and By route.) and by time frame (i.e. aging analysis)

This report should be shared with respective business units, at regular intervals so that aged debtors are highlighted and actions are put in place by business.

all contract between your company and the buyer should incloud paymeny terms  and aging will be better analysis tool

In sample answer by2 ways , First always make your customer SOA updated (( Make sure all invocies enter and checks received and you make apply as well and any return or debit or other in order to know well the outstanding invocies )) Second always make sure to visit all your customer on monthly basis to give them the imperission that you have nothing else in your life except asking to collect your invoices value.

System can have inbuilt controls for collections like giving some incentives to the debtors for earlier collections than the credit period ,levying penal interest for latter collections .Following up petriodically.Applying the carrots and sticks regularly and transparently.Withdrawal of credit facility for the defaulters.Periodical credit appraisals.