Burnish Bookkeeping LLC - Accounts Receivable and Payable

 AR (Accounts Receivable) refers to the outstanding invoices an organization has, or the money it’s owed from its customers. Within your personal life, an instance of AR would be purchasing a ticket to a sporting event or a concert for a friend with the understanding that they’ll repay you later.  It is basically an “IOU”. In business, Accounts Receivable represents a line of credit that is extended by an organization, due inside a brief frame of time, which might range from a couple of days to one year.

Accounts Receivable: What is it?

If an organization has Receivables, they have made a sale, yet haven’t yet collected the funds from the purchaser. Many businesses operate by permitting a part of their sales to be on credit, giving their customers the capability of paying after receiving the service.

For instance, utility companies usually bill their clients after they’ve received electricity. While the energy or utility provider waits for its clients to pay their bills, all unpaid invoices are considered AR.

Most companies run by allowing their customers to purchase goods in credit.  The price of sales on credit is what’s called Accounts Receivable. Usually, AR (Accounts Receivable), are the quantity of funds owed to the business by buyers for products and services rendered. The Receivables shouldn’t be confused with AP (Accounts Payable).

While Accounts Payable is the debt an organization owes to its vendors or suppliers, AR is the debt of the buyers to the business. AR’s are crucial assets to an organization, whereas AP are liabilities which must be paid in the future by the organization. Essentially, companies opt to provide receivables to encourage clients to select their products over their competition’s products.

It’s advisable for an organization to setup an Accounts Receivable process to determine the clients that already have paid and identify all payments which are overdue. The process is an easy turn of events which make the Receivables manageable and traceable.

Four Primary Steps for a Typical Accounts Receivable Process:

• Setting Up Credit Practices
• Invoicing Clients
• Keeping Track of Payments Received, as well as Payments Due
• Accounting for ARs

But, using economies of scale, the procedure might vary for small and large companies. Large companies have a larger inflow of cash, so they usually invest in highly skilled credit management teams, as well as IT systems to efficiently assist in improving and managing the process.

For more information about our accounts receivable and payable services please feel free to get in touch with Burnish Bookkeeping LLC today at 910-231-9538.