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What is Accounts Receivable? Definition

Wikipedia defines Accounts Receivable as:

… a legally enforceable *claim for payment to a business by its customer/ clients for goods supplied and/or services rendered in execution of the customer’s order.

 Cash In’s definition is:

The money your customers owe you for the service or product you provided on credit.  Receivables Management  is the work you do to collect your money on time and in full.  And finally, an Accounts Receivable Management System is what you need to make sure you get that work done on time and completely.

Accounts Receivable Management = Collection Prevention.  

Do your receivables management work correctly and on time and you’ll prevent most of your collection problems before they ever occur. 

Tasks include but are not limited to:

  • Invoicing
  • Posting payments
  • Account reconciliation
  • Dispute Resolution
  • Issuing appropriate credits and applying them
  • Collections
  • Credit Management, including but not limited to
    • Checking customer credit
    • Managing credit limits
 
In a large company it can get more complicated but these are the basic tasks most small businesses need to attend to.
 
Unfortunately many employees and even owners will avoid doing receivables management work whenever there is anything else to do.  And there is always something else to do.

Sales and Your AR

Perhaps one of the best ways look at Accounts Receivable Management or really the final collection of your accounts receivable is, as a completion of the sales cycle.  With just a moments thought you’ll realize that’s not a stretch.  Sales we don’t get paid for aren’t sales and customers who don’t pay aren’t customers.  They both cost money instead of making money.  But I digress – the point is Receivables Management isn’t a separate thing – it’s the last and frankly the most desired step of the entire sales process.  Let’s try to give it the attention and respect it deserves.

If you are an accounts receivable specialist, more commonly known as collector, Kudos to you – you probably don’t get the respect you deserve but my hat is off to you:)

Questions? Call me at 800-201-CA$H (2274) my extension is 110.

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