Podcast
Questions and Answers
Why is timely invoicing important for accounts receivable management?
Why is timely invoicing important for accounts receivable management?
- It allows customers to pay without delays.
- It improves cash flow by reducing payment time. (correct)
- It minimizes the risk of legal issues.
- It helps in resolving discrepancies faster.
What should be done when a customer indicates a problem with an invoice?
What should be done when a customer indicates a problem with an invoice?
- Ignore the issue and wait for the due date.
- Authorize partial payments if possible. (correct)
- Terminate the relationship with the customer.
- Adjust the terms of the invoice.
What is a recommended strategy for handling customers with a history of late payments?
What is a recommended strategy for handling customers with a history of late payments?
- Increase the grace period for payments.
- Limit the number of purchase orders they can make.
- Eliminate stringent payment terms.
- Start collection efforts before the due date. (correct)
What should companies do regarding purchase orders to avoid future complications?
What should companies do regarding purchase orders to avoid future complications?
What effect does applying cash the same day the payment is received have on collections?
What effect does applying cash the same day the payment is received have on collections?
What approach should be taken with accounts receivable policies to improve cash flow?
What approach should be taken with accounts receivable policies to improve cash flow?
If a company has been giving a grace period on discounts, what action should they consider?
If a company has been giving a grace period on discounts, what action should they consider?
Why is it essential to resolve discrepancies quickly in accounts receivable?
Why is it essential to resolve discrepancies quickly in accounts receivable?
What should be carefully considered when confirming purchase orders?
What should be carefully considered when confirming purchase orders?
Why do many companies accept a certain level of bad debts?
Why do many companies accept a certain level of bad debts?
How should a company respond when the economy is in a recession?
How should a company respond when the economy is in a recession?
What is a common tactic used by buyers when placing orders via telephone?
What is a common tactic used by buyers when placing orders via telephone?
What is the relationship between bad debts and credit policies during favorable economic conditions?
What is the relationship between bad debts and credit policies during favorable economic conditions?
What is a potential risk when a seller includes terms in small print on a purchase order?
What is a potential risk when a seller includes terms in small print on a purchase order?
Which of the following accurately reflects the consequence of having no bad debts?
Which of the following accurately reflects the consequence of having no bad debts?
What is a key consideration for accounts receivable professionals regarding purchase orders?
What is a key consideration for accounts receivable professionals regarding purchase orders?
What is the primary reason for an accounts receivable professional to have difficulty applying cash to outstanding invoices?
What is the primary reason for an accounts receivable professional to have difficulty applying cash to outstanding invoices?
What should be done after the second unauthorized deduction by a customer?
What should be done after the second unauthorized deduction by a customer?
What is required for automated clearinghouse debits to be processed?
What is required for automated clearinghouse debits to be processed?
What is one suggested way to communicate with customers to reduce unauthorized deductions?
What is one suggested way to communicate with customers to reduce unauthorized deductions?
What is the primary difference between automated clearinghouse credits and debits?
What is the primary difference between automated clearinghouse credits and debits?
What action can be taken to prevent customers from making unauthorized deductions?
What action can be taken to prevent customers from making unauthorized deductions?
What is one of the suggestions for dealing with customers who repeatedly take unauthorized deductions?
What is one of the suggestions for dealing with customers who repeatedly take unauthorized deductions?
What is an example of an unearned discount?
What is an example of an unearned discount?
What is a potential outcome when customers realize deductions are not permitted without justification?
What is a potential outcome when customers realize deductions are not permitted without justification?
What causes the biggest headaches for credit and collection professionals?
What causes the biggest headaches for credit and collection professionals?
Which of the following is NOT an effective general tip for handling unauthorized deductions?
Which of the following is NOT an effective general tip for handling unauthorized deductions?
Which of the following is NOT a common reason for unauthorized deductions?
Which of the following is NOT a common reason for unauthorized deductions?
What benefit can be gained from implementing improved procedures for customer returns?
What benefit can be gained from implementing improved procedures for customer returns?
How does a 2/10 net 30 discount affect a company's return?
How does a 2/10 net 30 discount affect a company's return?
What characterizes an authorized deduction as opposed to an unauthorized one?
What characterizes an authorized deduction as opposed to an unauthorized one?
What impact can unearned discounts have on a company's cash flow?
What impact can unearned discounts have on a company's cash flow?
What is a common method for calculating a reserve for bad debts?
What is a common method for calculating a reserve for bad debts?
Why is it important to call customers early about late payments?
Why is it important to call customers early about late payments?
What strategy can help in reducing bad-debt write-offs?
What strategy can help in reducing bad-debt write-offs?
What is the underlying principle of the technique 'follow up, follow up, follow up'?
What is the underlying principle of the technique 'follow up, follow up, follow up'?
What factor might complicate the calculation of bad-debt reserves?
What factor might complicate the calculation of bad-debt reserves?
What is a potential risk if delays occur in contacting customers about overdue accounts?
What is a potential risk if delays occur in contacting customers about overdue accounts?
How can credit managers effectively reduce their bad-debt write-offs?
How can credit managers effectively reduce their bad-debt write-offs?
Which of the following could weaken the relationship between credit and sales teams?
Which of the following could weaken the relationship between credit and sales teams?
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Study Notes
Accounts Receivable Issues
- Accounts receivable is a large asset for many businesses.
- Timely invoicing leads to faster payments.
- Invoice accuracy should be prioritized without delaying payment.
- Offer stricter payment terms for new clients and during annual reviews.
- For customers with late payment history, collection efforts should begin before the due date.
- Grace periods for discount payments should be reduced or eliminated.
- Discrepancies should be resolved promptly for payment.
- Partial payments can be authorized for an invoice with customer disputes.
- Customer problems should be logged and analyzed for process improvement.
- Cash should be applied the same day received.
Dealing With Purchase Orders
- Salespersons should be careful about purchase orders containing clauses that could lead to future problems.
- Confirming purchase orders may include additional terms not agreed upon orally.
Bad-Debt Reserves
- Bad debts are expected and companies will have a reserve allowance for them.
- Companies with no bad debts indicate they may not be maximizing sales.
- Economic changes impact bad debt and reserves.
- Reserves should be increased in recessions and decreased when the economy improves.
- There is no set method for calculating bad-debt reserves.
How to Reduce Your Bad-Debt Write-Offs
- Early calls to customers improve chances of collecting payments.
- Communication between sales and credit teams can help avoid bad debts when a customer is experiencing financial difficulty.
- Regular follow up with customers encourages timely payments.
Automated Clearinghouse Credits and Debits
- Automated clearinghouse credit payments are initiated by the payor and require preauthorization.
- Automated clearinghouse debits are initiated by the payee, require written preauthorization from the receiver.
Handling Deduction Issues
- Unearned discounts are discounts offered for early payments, but taken without meeting the criteria.
- Unauthorized deductions may include short shipments, damaged goods, or missing documentation.
- Customers should provide detailed remittance advice outlining reasons for deductions.
Ways to Eliminate Deduction Problems
- First-time deduction offenses can be ignored, warnings can be issued for subsequent offenses, and deductions can be billed back after that.
- Improved return procedures should be implemented for customers.
General Deduction Advice
- Customers should be informed about payment requirements.
- A credit memo policy should be implemented.
- Stickers on invoices reminding customers to call for deductions will help minimize unauthorized deductions.
- A deduction system should be implemented for follow-up calls.
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