Managing Receivables: Policies For Receivables And Collection

managing receivables, account, credit & collections, policies
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Proper receivables management increases profits by lowering the chance of bad debts. Management is more than just reminding customers to pay their bills on time. It is also necessary to identify the reasons for such delays and devise a strategy for addressing them. In this article, I will be discussing what managing account receivables is all about, including its credit collections and policies.  

Managing Receivables


Receivables are the debts due by customers to a business as a result of the sale of items or services in the normal operating cycle. This is money that has been put on hold as a result of credit sales. Trade receivables, accounts receivables, book debts, miscellaneous debtors, and bills receivable are all terms for receivables. Receivables management is also known as trade credit management.

Purpose of Managing Receivables:

#1. Sales Growth Motive.

The primary goal of credit sales is to raise the company’s total sales. Customers who do not have the requisite finances to acquire the goods may do so on credit. As a result, investing in receivables is driven mostly by a desire to increase sales.

#2. Increased Profit Motive

Credit sales increase a company’s total sales. As a result, the company’s profitability increases.

#3. Sales Retention Motivation


Customers are given credit in order to safeguard present sales from incoming competitors. Customers may seek out competitors who do if things are not sold on credit.

Receivables Management Objectives

Credit management is another term for receivables management. The goal of receivables management is to increase the firm’s sales and profits to the point where the return on extra receivables investment equals the cost of the increased receivables investment.


The goal of receivables management should be to help the company achieve its declared goal of building shareholder wealth. As a result, in order to maximize the return on receivables investment, the finance manager must develop a proper credit strategy for the firm.

Receivables Management Policy

The credit strategy of any business should be organized in such a way that the projected benefits surpass the expected expenses, i.e. profit maximization. The important characteristics of receivables management are as follows:

1. Establishment of credit policies

2. Credit assessment


3. The credit determination

4. Receivables management

Managing Account Receivables

The term receivable refers to money that is owing to you but has not yet been received. This demonstrates that the business has extended credit to its customers. Accounts receivable are the funds that a business is entitled to receive following the sale of items or services on credit for a specified period of time.

Accounts receivable management refers to the rules and procedures you apply to manage past-due sales or non-payments. A solid accounts receivable process, when implemented properly, can contribute to a healthy cash flow and profitability.

Accounts receivable management is the process of ensuring that consumers pay their bills on time. It aides businesses in avoiding running out of working cash at any point in time. Additionally, it prevents clients from making late or non-payments on pending payments. It enhances the company’s financial and liquidity position.

Proper receivables management results in profitability by reducing the risk of bad debts. Management encompasses more than simply reminding consumers to pay their bills on time. Additionally, it requires identifying the causes of such delays and developing a strategy for resolving them.

What Are The Procedures Involved in Managing Accounts Receivable?

A receivables management method involves the following steps:

  • Prior to accepting any terms and conditions, the clients’ credit rating, i.e. their ability to pay, will be evaluated.
  • Constantly checking for the possibility of non-payment or payment delays.
  • Customer relationships must be maintained to minimize bad debts.
  • Complaints of customers are addressed.
  • After payments are received, the balances in each account receivable should be reduced.
  • Keeping bad debts out of outstanding receivables for a specified period

Managing Credit Receivables & Collections

It is critical for an accounts payable department to be able to manage credit and collection information. The JD Edwards World Accounts Receivable system contains a number of capabilities that can help you handle managing receivables of credit & collections. You can organize and define data to meet the specific needs of your business.

Managing Credit and collections receivables is made up of the following elements:

  • Maintaining a record of credit and collection accounts
  • In preparation for customer analysis, A/R data is being updated.
  • calculating the average number of days delivery is delayed
  • Examining the account’s status data
  • Credit information administration
  • Credit cassette production is a time-consuming and labor-intensive operation.
  • Information management for collections
  • Printing credit and collection reports is available.

The methods for efficiently handling your credit and collections information are outlined below.

For Credit Details 

An identified web address can be used to obtain an area of client information while processing credit information. You could, for example:

  • Analyze a summary of a consumer’s credit history to identify those who have gone over their credit limit.
  • Credit limits and credit review dates can be changed or updated
  • Investigate a customer’s payment patterns and transaction history.
  • Make a tickler message or a reminder for the future.
  • Notes from customers can be entered and analyzed.

For Collection Of Information

  • By accessing numerous accounts receivable information from a single consolidated website while managing collections information, you can evaluate client accounts and make collection decisions more rapidly.
  • Customer accounts that are past due or have tickler notifications that need to be reviewed should be monitored and resolved.
  • Show personalized client profiles to help you analyze and document collection and obligation difficulties.
  • For past-due accounts, print payment reminders or delinquency warnings.
  • Choose whether or not to include the name of a customer on a collection report. 
  • Policies for Managing account receivables

Policies for Managing Account Receivables

This policy acts as a reference and practical guide for Florida State University’s accounts receivable administration. It creates methods for tracking and collecting receivables. The goal of the policy is to decrease the number of past due, delinquent, and uncollectible accounts. 

Policies for managing account receivables are:

#1. Authorization

In policies for managing account receivables, it is preferable for departments to get payment before or upon delivery of a good or service; but, if this is impossible or impractical, departments may be obliged to supply a good or service before obtaining payment.

#2. Billing and Invoicing Tasks

  • Each customer must provide enough demographic information to allow the creation of an accounts receivable record and, if necessary, subsequent collections.
  • Billing must be done on a regular basis for all accounts receivable.
  • The following items, at a minimum, will be appropriately represented on invoices:
  1. The description and pricing of the purchased goods and/or services
  2. Payment should be made to the following address
  3. Include the name and phone number of the person who should be contacted for billing inquiries.
  4. The entire sum owed
  5. The invoice’s due date, which is normally when it is received.

#3. Processes and Systems

  • For the establishment, documentation, modifying, reconciling, collecting, and reporting of receivables, written processes must be maintained.
  • Accounting systems and processes will be used to assure policy compliance. Employees who are in charge of keeping and billing accounts receivable should not be in charge of collecting payments or making deposits, therefore systems must provide efficient duty segregation.
  • To verify that all sales and services are billed accounts receivable data should be reconciled with sales, service, and/or contract records. Accounts receivable payments should be reconciled with cash collection records.
  • Employees who deal with receivables data must be taught and informed on the university’s cash management policy (4-OP-D-2-B Cash Management).
  • In accordance with policy 4-OP-F-3 Records Management, departments should keep records of charges, payments, and collection efforts.

#4. Credit Balances

  • Written protocols for the periodic examination of credit balances should be kept in order to determine the underlying cause. Errors must be addressed as soon as possible, and clients must be paid as needed.
  • Account receivable credit balances arising from customer overpayments may be used for future product or service purchases when a long-term relationship with the client is envisaged.
  • When credit balances owed to the customer are due to be reimbursed, they are categorized as liabilities and are controlled under policy 4-OP-D-2-C Payables and Disbursements.

#5. Returned Payments 

  • Any physical or electronic check returned to the University will result in bank fees incurred throughout the payment tendering process.
  • Service charges on returned payments are permitted up to the amount authorized in Florida Statute Section 832.07. According to FS 832.07, the client must be notified in writing before a returned payment service charge is applied.

#6. Reporting

  • To indicate if a client has been billed/invoiced for a good or service is given, a billing status report for all receivables should be maintained.
  • It is required to keep an aging schedule and to report it to the Controller’s Office on a regular basis.

What is receivables management?

Receivables management is the planning and administration of debt owed to consumers as a result of credit sales. Simply put, the success of your order to sales conversion is only determined when your sales are turned into cash.

Why is it important to manage receivables?

It is important to manage receivables because…

#1. Sales Growth Motive.

#2. increased profit Motive

#3. Sales Retention Motivation

What are different types of receivables?

Trade accounts receivable notes receivable, and other accounts receivable are the three forms of receivables.

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