This includes client-wise evaluation of payment terms and making necessary changes as and when required. The aging report also helps us to define and manage credit policies. This includes regular and strict follow-ups with clients for payments. Moreover, it helps us to monitor our billing and collection process. Collections should also be timely and will help decrease our bad debts.Thus, it must be kept in mind that we must have a minimum amount of bad debts. But Just making good sales is not enough. The higher the accounts receivable the higher our assets will be. Why Is Accounts Receivable Aging Report Important? You can increase or decrease the credit limit period according to market conditions. These limits are based on the finances of the buyer and its payment history. The payments delayed upon this credit limit is called aging. This limit is set by the company’s credit department. The total amount of accounts receivable which a company allows to a debtor/customer is often limited by a credit limit. Non-trade receivables are all other receivables, such as amounts due from employees against loans, etc. Trade receivables are from a company’s routine sales activities. These Accounts Receivables are our assets and listed as a current asset on our balance sheet.Accounts receivable can be further subdivided into two trade receivables and non-trade receivables.
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