Accounts Receivables Management Case Study

Online, October 30, 2013 (Newswire.com) - Accounts Receivable Management as the name suggests, are the payments that are due from the customers of an organization for the products or services that have been offered to them on credit. Receivables Management deals with the formulation of credit policy, the discount offered, the collection policy and the measures undertaken.

ACCOUNTS RECEIVABLE MANAGEMENT - PRIMARY OBJECTIVE

The primary objective of Accounts Receivable management is to maximize the accounts receivable collection cycle, improve cash flow and reduce bad debt losses and minimize the lost charges.
Poor management of Accounts Receivables lead to mounting of various overdue accounts, collection of debt expenses and sharp rise in bad debts thereby limiting your business potential.

CONTROL OF ACCOUNTS RECEIVABLES

Some of the basic techniques for controlling accounts receivables are discriminate analysis, ratio analysis, electronic data processing and decision tree approach. Apart from this, information system with regard to receivables turnover, progress of collection size of bad debts, age of each account and total number of delinquent accounts are also used to control the accounts receivables of an organization.

WAYS TO OPTIMIZE ACCOUNTS RECEIVABLE MANAGEMENT

1. A strategic approach to manage receivables that support the company's goals.
2. The use of key metrics to track results.
3. Reward incentives for cash collection on quarterly basis.
4. A robust process to resolve issue quickly
5. Automate repetitive functions and prioritize activity with the use of technology.

RECEIVABLES MANAGEMENT - THIRD PARTY OUTSOURCING

Today, companies appoint third parties to undertake this back office process to monitor the accounts receivables. In other words, the companies give a third party the responsibility of account receivables management. The BPO companies collect the due amounts from the respected customers on behalf of the company and hand it over to them in exchange for a pre-decided fee. Through outsourcing, the company maintains a smooth relationship with the customer as there is no direct negative contact in the process of collecting dues.

OUTSOURCING ADVANTAGES

Accounts Receivable outsourcing increases the cash flow of the company resulting in fewer overdue customers. In addition we get the benefits of expansion without hiring & training additional staff for accounts receivable and collection. Operational costs are also reduced through outsourcing. The third party recovery services quickly identify the most viable accounts and focus on them to get the highest net back.

CONCLUSION

Late paying Customers are a true epidemic. This can cripple a small business' ability to operate. Revamp your entire receivables management process and make the collection process easier by striving to improve accuracy in order and formulate a portfolio strategy for receivables. Cost optimization is imperative and outsourcing is a valuable tool to achieve this.

TIP

While managing accounts receivable, it is always worthwhile to know what the customer is thinking, his likes and his dislikes in order to make him pay up.