Accounts Receivables

Accounts Receivable represents the amount due from customers or Debtors as a result of selling
Goods on Credit. The term debtors is defined as debt owned to the firm by customers arising from
sales of goods or services in the ordinary course of business. The three characteristics of receivables
are the element of risk, economic value, futurity explains the basis for efficient management of
receivables. The element of risk should be carefully analysed. Cash sales are totally riskless but credit
sales are. The customer from whom receivables or book debts have to be collected in future are
called Trade debtor and represents the firms claim on assets.

Receivables Management, also termed as credit management, deals with the formulation of credit
policy, in terms of liberal or restrictive, concerning credit standard and credit period, the discount
offered for early payment and the collection policy and procedures undertaken. It does so in such a
way that taken together these policy variables determine an optimum level of investment in
receivables where the return on that investment is maximum to the firm. The credit period extended
by the firm usually ranges from 15 to 60 days.

When goods are sold on credit, finished goods gets converted into account receivable in the books
of seller. In the books of the buyer, the obligation arising from the credit purchase is represented as
accounts payable. Accounts Receivable is the total of all the credits extended by the firm to its
customers.

A Firms investment in accounts receivables depends upon how much it sells on credit and how long
it takes to collect receivable. Account receivable or sundry debtors constitute the 3rd most important
assets category for business firm after plant and equipment and inventories and also constitute the
2nd most important current assets category for business firms after inventories.

Since accounts receivables represents a sizable investment on the part of most firms in the case of
public enterprises in India, it forms 16 to 20 percent of current assets. Efficient management of
these accounts can provide considerable saving to the firm.

Modules required

1. Customer Management
2. Debtor Management
3. Goods Management
4. Books Management
5. Credit Management
a. Credit Policies
b. Credit extensions
c. Discounts offered for early payments
d. Default procedures
e. Collection policies
f. Return on investment trends based on customers/vendors/debtors
6. Service management
7. Risk Management
8. Sales Management
 a. Cash sales
b. Credit sales
9. Asset Management
10. Accounts Management
11. Accounts Payables and Accounts Receivables
a. Sundry Debtors
12. Inventory Management
13. Equipment Management
14. Alert Management
a. Alert for overdue accounts receivables
b. Alert for sharp rise in bad debt expense
c. Alert for collecting debt expenses and giving the discount to customers even though
they pay after the discount date and even after the net date.
15.