Question:
how do you think the accounts receivable system contributes to the overall success of a business? what impact do you think the accounts receivable system has on cash flows and on customer service
Answers:
Yes, accounts receivables do contribute to the success of a business. This is primarily because it gives your customers some time in order to pay for the product that they purchased from you. A business with the option for its customers to pay over time will attract more customers, thus increasing sales and profits. The drawbacks to accounts receivables is that your cash flows are underestimated since you have not received the cash for the sale that your business made. Also, sometimes a business has to write-off some of the accounts receivables due to a customer defaulting and not being able to make the payment.
When considering customer service, as mentioned above, A/R provides your customers with the option to pay later for the products or services a business provides. I don't know of any large, successful business that doens't have any A/R on it's balance sheet. It is almost one of the most common line items on a company's balance sheet assets.
Hope this helps.
The first answerer is right on.
In addition, an accounts receivable system must be efficient. To benefit the business, it must be able to collect its receivables in a timely manner. The aging of the receivables is an important measure for investors. A list of receivables on the books doesn't help the company operate if it will never collect on them. To encourage customers to pay more quickly, many companies offer a discount for prompt payments such as 2% discount if paid within 10 days. The customer is just throwing away money by not taking advantage of offers like this and it helps the company to get its cash quickly.
Accounts receivable system is the system used to track the amount owed to the company by it's customers. If you can not track the invoices and payments, the company could possibly double bill a customer or forget to collect an invoice from someone else. Collecting the money is as important or more important that selling the product in the first place. A good system will inform the customer in a way that he is not offended but with information that gets him to pay.
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