Account Receivables- The Pulse of the Business

Account receivable is a file under a company or a person’s name that owes funds to you or any other company. Below given is a simple example to explain Accounts receivable.

Marie ordered 35 books from your bookstore, since she has an account with you. You ship the books with an invoice of two hundred dollars. You will then file a copy of this invoice in your “Accounts receivable”, where it remains till the time Marie sends you the invoice payment.

Managing and understanding the financial business drives in the balance sheet and income statement assists one in setting up as well as running a more profitable and efficient business. Accounts receivable are the unpaid invoices of your customers and any other sum that your customers owe to you. The total of all the customer accounts receivable is often listed under current asset in the balance sheet.

When your customers owe some money to you, there is absolutely no need to move to and fro in order to collect it. If your account receivable system is getting older now or still consists of Excel Worksheets or invoice letters, it’s now time for you to upgrade your billing system and assure yourself that you get paid fully and promptly.

As a business owner, one should gain a complete understanding of their finances, prior to turning it over to anyone else. It is highly important being an owner of the business that you have your fingers on your financial pulse. You should familiarize yourself thoroughly about some good software’s that can track receivables and state clearly, the number of invoices being viewed, sent, how many of them are paid and how much balance is still remaining.

Account receivable collections have a great impact on the cash flow and so the responsibility of daily management of collections and credits should be entrusted to one person in the company. Management of this accounts receivable is a very significant function because assortment of outstanding receivables corresponds to single most essential cash source for all companies that sell goods on open account.