ACCOUNTS RECEIVABLE

Accounts Receivable

Accounts Receivable

Introduction

Offering sales on credit is common practice for most organizations and accounts receivable can be one of the most significant assets on an organization's balance sheet. As a percentage of total assets, accounts receivable has been estimated to constitute 20% for large organizations and 30% in small / medium sized organizations (Jackling, Raar, Wigg, Williams, and Wines, 2004). Given the size of the accounts receivable balance for many organizations and the significant degree of sales that are made on credit, it is important that this asset is appropriately managed and that suitable financial analysis tools are used for internal control purposes. The imperative of ensuring this asset is efficiently and effectively managed is heightened during economically depressed periods.

This paper is organized as follows. A description and literature review pertaining to the traditional accounts receivable Aging Schedule and ACP is provided. This is followed by an examination of deficiencies inherent to the two approaches and then a description of how corrections can be made to overcome these deficiencies. The paper's concluding section outlines implications arising for practice, and suggests some avenues for further research that build on the revised measures advanced herein.

Discussion

Credit balances that may exist in some sub-accounts shall be shown in current liabilities under the title "Credit balances of accounts receivable." For purposes of presentation in the balance sheet, credit balances in accounts receivable should not be deducted from the gross amount thereof. Accounts receivable represent credit granted by the company to its customers with an open account. To retain customers and attract new customers, most companies find it necessary to offer credit. Credit sales, resulting in accounts receivable, usually include credit terms that require the payment in a specified number of days. Accounts receivable are treated as assets of the company, and become effective in less than one year.

In today's economy, accounts receivable management has long gone beyond just the functions of financial management. In today's commercial organizations involved in the management of the following individuals and departments:

General manager

The commercial department and sales department (sales manager, sales manager, sales managers)

Finance Department (Chief Financial Officer, Financial Manager)

Legal Department and the Security Service

The problem of the liquidity of receivables - becomes a key problem in almost every organization. She, in turn, is divided into several problems: the optimal volume, turnover, quality of receivables.

Meeting these challenges requires skilled management of accounts receivable, which is a type of strengthening the financial position of the firm. Experience in enterprise reform suggests that measures to return the receivables included in the group of the most effective measures to improve efficiency through internal resources of the enterprise and can quickly bring a positive result. Return of the debt in a short time - a real opportunity to replenish working capital deficit. Management of accounts receivable may be identified with any other type of control as the process of implementation of specific management functions: planning, organization, motivation and ...