What Are Uncollectible Accounts Receivable?

Accounts Receivable Management refers to the provision of goods or services from a creditor (seller) to a trustee (purchaser) in the credit sales business, from the establishment of the creditor's right to the actual recovery of the money or the end of the process as bad debt The credit-granting company adopts a systematic method and a scientific method to correspond to the management of the entire process of collection of receivables. The purpose is to ensure full and timely receipt of receivables and reduce and avoid credit risk. Accounts receivable management is an important part of credit management, and it belongs to the later credit management category of enterprises. ^[1]

Accounts Receivable Management

Generalized

The main work of a credit management manager in recovering receivables is not only to reduce bad and bad debts, but also to balance profits and risks and increase the return on capital. But bad debt is not necessarily a bad thing, there are rewards only when there is risk.

With the global economic slowdown, the shortage of corporate funds has become a common phenomenon. According to LINKED-F data from Platinum Consulting, credit sales, a business model that expands business by financing customers, is gradually becoming a trend. However, credit management is by no means a simple risk control. Rather, through control, transactions that could not be concluded due to excessive risks can be carried out smoothly. Credit managers are a group of people chasing return on investment and balancing risk and profit.

For various reasons, in

Measures

Strengthen the daily management of accounts receivable

1. Set up a detailed ledger of accounts receivable

To strengthen the management of corresponding accounts,

For an enterprise, the existence of accounts receivable itself is a unity of production and sales. On the one hand, the company wants to use it to promote sales, expand sales revenue, and enhance competitiveness, while also trying to avoid Existing difficulties in capital turnover for enterprises,

1. Declining corporate efficiency

Reduced corporate

1. The positive impact of accounts receivable on the production and operation of enterprises

In the fierce commercial competition, in order to obtain profits, enterprises must sell goods and obtain sales income. The amount of income is the basis for testing business results. Especially under market economic conditions, the existence of business results determines the fate of the company. Therefore, an enterprise can only make profits if it has income, and in order to obtain sales revenue, the company will use various methods to promote sales. Credit sales are one of the important methods. Credit sales generate accounts receivable, which attracts a large number of customers and expands sales. This has brought benefits to the enterprise, so accounts receivable have a significant impact on the operation of the enterprise.

2. The negative impact of accounts receivable on the production and operation of enterprises

The increase of accounts receivable brings income to the enterprise, but also brings risks. If the accounts receivable are not recovered in time and bad debt losses occur, it will directly reduce

Credit standard

Establish a sound credit control mechanism

Three Keys to Controlling Credit RiskOrganization / Policy / Person

Competence system of credit control personnel-communication skills,

Many enterprises have the following main tendencies in the management of accounts receivable:

(1) Insufficient investigation of customers' credit status before selling goods on credit, resulting in increasing accounts receivable. The customer's credit status investigation should first understand the customer's past credit status, that is, obtain the customer's credit information through face-to-face interviews, inquiries, and watching; second, it should evaluate the customer's credit status and understand the customer's finances through a certain evaluation method Situation and solvency, based on this information to decide whether to adopt a credit sales policy. Many companies have not fully investigated and understood the customer's credit status. In order to increase market share, improve competitiveness, and increase sales revenue, they have blindly increased the amount of credit sales, resulting in the failure to recover many credit sales funds in a timely manner, and the scale of accounts receivable of enterprises. It is getting bigger and bigger, thus increasing the risks of business operations.

(2) The age of the corresponding accounts is not analyzed in a timely manner, leading to increased corporate risks. Aging reflects the holding time of accounts receivable. It is not only one of the main basis for estimating the overall risk and time value loss of accounts receivable, but also the realistic basis for accruing bad debt provision. In general, the difficulty and focus of collection is overdue payments, especially old accounts. The longer the arrears, the more difficult it is to recover, the less likely it is to realise, and the lower the expected value. The property management department of an enterprise should use the aging analysis table to detect the development trend of accounts receivable, avoid the existence of long-term accounts receivable, and reduce corporate risks. The ageing of accounts receivable of many enterprises is not analyzed in a timely manner. A large number of old accounts and bad debts are posted year-round, which makes it difficult for the company to revolve its funds. At the same time, no corresponding measures have been taken for receivables that have been asked for a long time when they are being posted. Bankruptcy or death, loss or loss of collection voucher data, or unknown departure status of the parties, etc., make the accounts receivable a bad debt, which increases the management cost of the enterprise and directly reduces the economic benefits of the enterprise.

(3) Improper methods and procedures for collection of accounts receivables have led to a substantial increase in collection charges for accounts receivables. The collection fee refers to the various expenses that the creditor consumes in order to collect the response to the receivable when the arrears unit fails to repay the debt due to various reasons, which includes labor costs and other costs. Although the company conducted a credit survey and credit evaluation on users before conducting credit sales, some accounts receivable could not be recovered in a timely manner due to various reasons, which required the company to develop reasonable collection methods and procedures. Generally speaking, the collection of receivables by enterprises should start with the least collection method, that is, first from the telephone contact, to letter notification, telegraphic collection, dispatch interviews until resort to law, etc., and some enterprises are collecting collection Etc., did not adhere to the principle of giving priority to benefits, and improper collection methods caused a substantial increase in collection fees, which also increased the management costs of enterprises.