Accounts receivable is a term used to describe the funds that companies have from the sales of their products or services. When a company sells something to a customer, it has outstanding bills to the customer. Companies have to manage their accounts receivable to pay their bills for goods and services they have purchased. Accounts receivable are one of the most important financial metrics because they tell you how well your company is doing financially.
The usefulness of accounts receivable in business management
Accounts receivable are funds that companies need to settle their bills to customers. It becomes necessary to have accounts receivable automation. Companies have to manage their accounts receivable, since it represents the money owed to them for the sales of goods and services. Consequently, this means that an increase in sales leads to an increase in accounts receivable. Companies can manage their accounts receivable by having different payment terms with their customers. For example, they can pay their suppliers on time if they want to get more accounts receivable. This way, they can afford to buy more supplies and make more sales.
The advantages of always planning your accounts
When a company has more sales, it has more accounts receival. For example, if Company A has $100,000 in sales, it has $100,000 in accounts receivable. On the other hand, if Company B has $200,000 in sales, it has only $100,000 in accounts receivable since it has less than half of Company A's sales. Companies can manage their accounts receivable by having different payment terms with their suppliers; this way, they can afford to buy more supplies and make more sales. Another way companies can manage their accounts receivable is by not paying invoices on time. However, this strategy has risks, since not paying invoices on time could cause a company's suppliers to cut off business privileges such as credit lines or delivery schedules. Instead, companies can wait until they have enough cash on hand to cover their bills before paying their suppliers. This way, they can afford to buy more supplies and make more sales.