Perhaps you did not have to deal with this question in the past, when you were a clerk. As a manager, you will have to deal with this question nearly every single day. Sales staff will come running to you, trying to get you to lighten up on your credit qualifications in order to make additional sales. Managers and those who are paid off the bottom line might prefer that you tighten up the credit qualifications so that there are fewer bad debts that have to be written off.
Accounts Receivable management is a demanding job. You'll be making decisions that can make or break a company. Your role is unique and complex--one that is closely integrated into the overall customer service of your company. In this course, we'll look at what exactly AR is, what it is you're going to be doing, what you'll need to know to get started, why your company needs an accounts receivable department to begin with, and what some of the keys are to a successful accounts receivable department.
In this course, we're going through all the basics. You don't need any prior accounts receivable experience or knowledge to successfully complete this course. Using a 'ground-up' approach, we'll be covering topics such as 1. approving credit, 2. the billing process, 3. collecting money, 4. customer service, 5. handling deductions, 6. legal considerations, 7. bankruptcy, as well as many other important topics.
So come join the fun...Let's get started now!
Why an Accounts Receivable Department?
At the end of the day, there is an accounts receivable department because it should increase revenues to the company.
Here's an example:
Imagine XYZ, Inc., a small company that sells just one product, widgets, and it currently sells one widget per day at $10 per widget. That means it sells 365 widgets per year and earns an income of $3,650, from which the company has no problem meeting expenses and paying your salary. Let us say for a moment that there is a profit of $4 per widget, or $1,460 per year.
Now imagine that company officials want to increase sales. One way they do this is by selling widgets on credit. They accept credit cards, for which they pay a $1 fee per transaction. Suddenly, people who want to buy widgets but never have handy cash can now buy one. Even though XYZ, Inc.. absorbs the $1 fee, it is now selling twice as many widgets: one a day with cash and one a day with credit cards. Therefore, the company is earning $2,555 in profit each year; that is, $1,460 from $4 profit per widget per day in cash sales and $1,095 per widget per day in credit card sales.
Later, upper management decides to allow people to buy on credit. There is no credit card fee, so profit will be $4 per widget. Your analysis as a manager suggests that you will collect about 80 percent of all widget purchases on credit but you will increase sales by 100 percent. Let us look at how your profit margins break down now.
Cash sales: 365 widgets x $4/widget = $1460 Credit card sales: 365 widgets x $3/widget = $1095 Credit sales: 365 widgets x $4/widget less $730 (which is 20% uncollectible of $3650) = 730 TOTAL PROFIT: $3285 on 1095 widgets, or, $3/widget.
Of course, these are just example numbers meant to show you that selling something on credit, even if there is an element that no one ever expects to collect, could end up profitable.
That likely will be another job that you, as an accounts receivable manager, will have to figure out. In conjunction with other departments, such as your accounts payable department, you will need to determine the total profit on a product and what the impact will be if certain parts of the debt remain uncollectible. For example, if your research determined that 40 percent of the debt was uncollectible rather than 20 percent, your company may think twice about selling on credit, since that would eat up all of your profit. But, even at 40 percent uncollectible debts, in which your company is earning no profit on that third of your widgets, the decision may still be made to continue selling the product.
Why? There are a number of reasons that you probably did not have to think about when you were a clerk, but now you do:
Did anything on this list surprise you? The bright side of uncollectible debts is not that bad at all! One of your determinations as a manager will have to be the comparison in values between what you are losing in income and profits with uncollectible debts and what you are gaining.
Back to the question we were trying to answer: Why an accounts receivable department?
The answer is simple: because sales on credit can increase revenue and profits.
The Keys to a Successful Accounts Receivable Department
There are a couple of keys to a successful accounts receivable department:
Issues in Accounts Receivables
Here are the issues you will face as an accounts receivable manager:
Accounts Receivable as an Asset
Your accounts receivable list is a liquid asset to your company because it could be converted into cash within a year if necessary. If your company is expanding or in need of some fast cash, your accounts receivable list can be:
Do financial statements, annual reports and invoicing policies just somehow make sense to you?
Or perhaps you've recognized some room for improvement in your Accounts Receivable Management skills and experience?
If any of these situations sounds familiar to you, then this course on the ins and outs of accounts receivable management may be just what you need in order to get things all squared away.
Be warned though--you're in for a demanding job. As a part of your company's accounts receivable management team, you'll be responsible for making decisions that have the potential to make your break your bottom line. Enrolling in this class can make navigating those decisions successfully a whole lot easier.
Along the way, you'll gain a clearer understanding of the class's five basic objectives:
While the structure of the course assumes that you have at least some type of experience in the accounts receivable arena, you can still succeed in the class without AR or management experience.
The class follows a self-paced, self-contained format that gives you the freedom to learn and participate when (and only when) your schedule permits. There are no textbooks or software programs REQUIRED for course enrollment, but there is a recommended reading list for those in search of a deeper understanding of the subject matter.
Enroll today to bring more value to your career and your company!
Examples of Asset AccountsAnything owned, whether tangible (a physical item) or intangible (the right to something) is an asset.
Examples of Expense AccountsOperating, non-operating, discontinued operations expenses, extraordinary losses, and losses due to accounting method change. Accounts Receivable Training SeminarsFree Online Bookkeeping Courses With CertificatesExamples of Equity AccountsThere are several types of transactions that effect owner equity including: investments, withdrawals of cash by the owner, revenue earned, and expenses incurred. Online Accounts Receivable Courses
A chart of accounts is a listing of the names of the accounts that a company has identified and made available for recording transactions in its general ledger. A company has the flexibility to tailor its chart of accounts to best suit its needs, including adding accounts as needed. Comments are closed.
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