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Goals and objectives of the course work. The main purpose of the work is to develop and implement ways and measures to reduce receivables and payables by studying and analyzing the process of organizing and maintaining receivables and payables in enterprises, based on the nature and content of receivables and payables. To achieve this goal, the following tasks are identified in the graduate qualifying work:
- Indication of the legal framework for the calculation of receivables and payables in private enterprises;
- Disclosure of the need, importance and objectives of the organization of accounting and analysis of receivables and payables in private enterprises;
- Types of receivables and payables and their classification;
- Study the procedure for recognizing receivables and reflecting them in the accounting records;
- Recognition of accounts payable and their reflection in the accounting records of the object of practice;
- Reasons for receivables and payables and their balance sheet;
- Analysis of the turnover and turnover of receivables;
- Carrying out the analysis of turnover and turnover of accounts payable.
Theoretical and methodological bases of course work. It is based on research theory used in modern economics, in particular the concept of accounting. Laws, presidential decrees, resolutions of the Cabinet of Ministers, instructions of the Ministry of Finance and the Central Bank were used in the preparation of the case.
Account receivables
Accounts receivables are legally enforceable claims for payment held by a business for goods supplied or services rendered that customers have ordered but not paid for. These are generally in the form of invoices raised by a business and delivered to the customer for payment within an agreed time frame. Accounts receivable is shown in a balance sheet as an asset. It is one of a series of accounting transactions dealing with the billing of a customer for goods and services that the customer has ordered. These may be distinguished from notes receivable, which are debts created through formal legal instruments called promissory notes.1
Accounts receivable represents money owed by entities to the firm on the sale of products or services on credit. In most business entities, accounts receivable is typically executed by generating an invoice and either mailing or electronically delivering it to the customer, who, in turn, must pay it within an established timeframe, called credit termsor payment terms.
The sales a business has made.
The amount of money received for goods or services.
The amount of money owed at the end of each month varies (debtors).
The accounts receivable team is in charge of receiving funds on behalf of a company and applying it towards their current pending balances.
Collections and cashiering teams are part of the accounts receivable department. While the collections department seeks the debtor, the cashiering team applies the monies received.
Accounts receivable can make impact on liquidity of the company, thus it is important to pay attention to this metrics. Therefore the investment risk must be as small as possible.2
An example of a common payment term is Net 30 days, which means that payment is due at the end of 30 days from the date of invoice. The debtor is free to pay before the due date; businesses can offer a discount for early payment. Other common payment terms include Net 45, Net 60 and 30 days end of month. The creditor may be able to charge late fees or interest if the amount is not paid by the due date.
In practice, the terms are often shown as two fractions, with the discount and the discount period comprising the first fraction and the letter 'n' and the payment due period comprising the second fraction. For instance, if a company makes a purchase and will receive a 2% discount for paying within 10 days, while the whole payment is due within 30 days, the terms would be shown as 2/10, n/30.
Booking a receivable is accomplished by a simple accounting transaction; however, the process of maintaining and collecting payments on the accounts receivable subsidiary account balances can be a full-time proposition. Depending on the industry in practice, accounts receivable payments can be received up to 10 – 15 days after the due date has been reached. These types of payment practices are sometimes developed by industry standards, corporate policy, or because of the financial condition of the client.
Since not all customer debts will be collected, businesses typically estimate the amount of and then record an allowance for doubtful accounts which appears on the balance sheet as a contra account that offsets total accounts receivable. When accounts receivable are not paid, some companies turn them over to third party collection agencies or collection attorneys who will attempt to recover the debt via negotiating payment plans, settlement offers or pursuing other legal action.
Outstanding advances are part of accounts receivable if a company gets an order from its customers with payment terms agreed upon in advance. Since billing is done to claim the advances several times, this area of collectible is not reflected in accounts receivables. Ideally, since advance payment occurs within a mutually agreed-upon term, it is the responsibility of the accounts department to periodically take out the statement showing advance collectible and should be provided to sales & marketing for collection of advances. The payment of accounts receivable can be protected either by a letter of credit or by Trade Credit Insurance.
Benefits of Accounts Receivable
Accounts receivable is an important aspect of a businesses' fundamental analysis. Accounts receivable is a current asset so it measures a company's liquidity or ability to cover short-term obligations without additional cash flows.
Fundamental analysts often evaluate accounts receivable in the context of turnover, also known as accounts receivable turnover ratio, which measures the number of times a company has collected on its accounts receivable balance during an accounting period. Further analysis would include days sales outstanding analysis, which measures the average collection period for a firm's receivables balance over a specified period.
Example of Accounts Receivable
An example of accounts receivable includes an electric company that bills its clients after the clients received the electricity. The electric company records an account receivable for unpaid invoices as it waits for its customers to pay their bills.
Most companies operate by allowing a portion of their sales to be on credit. Sometimes, businesses offer this credit to frequent or special customers that receive periodic invoices. The practice allows customers to avoid the hassle of physically making payments as each transaction occurs. In other cases, businesses routinely offer all of their clients the ability to pay after receiving the service.
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