Topic 9 Monitoring of Accounts Receivable.pptx

Topic 9 Monitoring of Accounts Receivable.pptx - Topic 09...

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Topic 09 MONITORING OF ACCOUNTS RECEIVABLE
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MONITORING OF ACCOUNTS After granting credit, supplier needs to monitor the customers’ accounts as well as assessing its own performance in managing the receivables Credit-related problems are more manageable if detected earlier Techniques used in monitoring include imposition of credit limit, aging of receivables, and tracking of the DSO
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MONITORING OF ACCOUNTS For effective monitoring, accounts receivable could be classified into categories based on scope of attention required Classifying accounts will enable creditors to be more focused in monitoring their customers, thus reducing cost and wastage in time and manpower For example, accounts can be classified as routine accounts and problem accounts
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ROUTINE ACCOUNTS Accounts that are usually willing and able to pay according to the terms of sale Lateness is rare and temporary, hence less attention is required Lateness, if occur, usually due to technical errors which normally caused by the creditor Minimum problem, however, continuous observation is required so as to maintain its clean status
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PROBLEM ACCOUNTS Regularly did not pay according to terms Payments often not paid in full and the balance of debt outstanding tends to rise from time to time Creditor needs to spend more time on these account, otherwise problems will be dragged into collection stage If ignored, or too late, accounts may turn bad
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PROBLEM ACCOUNTS If the source of the problem is known, and where possible, creditor should help debtor to get through Rehabilitation and survival of the customer will benefit the creditor in the long-term However, should the problem accounts affect the profitability of the company, supplies and credit facilities must be suspended or terminated
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