42. What Are The Goals Of Accounts Receivable?


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Liam Orr answered
Accounts Receivable is money owed to a business by its clients or customers. It's often shown on the Balance Sheet as an asset because it represents a legal obligation for the customer to pay their debt. Accounts Receivable represents money owed to the firm for the sale of products or services on credit - it is the billing of a customer for goods and services that they have ordered or had delivered but have not yet paid for. Typically, Accounts Receivable involves generating an invoice and either mailing or sending it electronically to the customer, who must pay it within an established deadline, called credit terms or payment terms. The Accounts Receivable departments use sales ledgers to record the sales a business has made.

The goals, or purposes, of Accounts Receivable departments
  • Keeping a record of money that is owed to the business by the clients or customers
  • Keeping an accurate record of the money received from clients or customers for goods or services received
  • Providing an accurate picture of what is happening financially within the company at any one time by keeping a record of billing information of customers
  • Keeping a record of any percentage discount arrangements for large or regular customers to make sure the customer receives the agreed discounts
  • Standardizing the look of the company invoice, what information is included and how the information is organized.

Accounts Receivable are not just limited to companies, individuals also have them. Individuals get Receivables from their employers in the form of monthly or bi-weekly paychecks. They are legally owed this money for services (labor) already provided.

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