Accounts Receivable Unit 2
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Questions and Answers

Which information is essential to include on an invoice to avoid collection issues?

  • Clear statement of payment conditions (correct)
  • List of previous invoices
  • Discount options available
  • Address of the customer
  • What is the recommended way to present the due date on an invoice?

  • Print it in bold (correct)
  • Leave it open to interpretation
  • Mention it verbally
  • Include it in a small font
  • Why should invoices not be printed on odd-colored paper?

  • They can be mistaken for advertisements
  • It makes them look unprofessional
  • They can cause confusion
  • They may not be properly scanned (correct)
  • What should be included to provide contact information on an invoice?

    <p>The name and direct number of the credit manager</p> Signup and view all the answers

    Which of the following details is NOT typically found on an invoice?

    <p>Detailed spending history of the customer</p> Signup and view all the answers

    What is recommended to ensure the printing is clear on invoices?

    <p>Utilize modern printers for clarity</p> Signup and view all the answers

    How should amounts due be presented on the invoice?

    <p>Clearly specified with discount options</p> Signup and view all the answers

    What can cause collection problems from invoices?

    <p>Leaving key payment details open to interpretation</p> Signup and view all the answers

    What is the primary purpose of an invoice?

    <p>To give customers the information needed to make a payment</p> Signup and view all the answers

    When should an invoice ideally be sent to ensure timely payment?

    <p>As soon as the goods have been shipped</p> Signup and view all the answers

    What common misconception do customers have regarding payment terms?

    <p>Payment is due 30 days after receiving the invoice</p> Signup and view all the answers

    What are the typical payment terms referred to as an 'open account'?

    <p>Customers have a specified time to pay after receiving goods</p> Signup and view all the answers

    Which of the following can cause delays in payment from customers?

    <p>Customer's purchasing department approval requirements</p> Signup and view all the answers

    What is the usual consequence of delaying the sending of invoices?

    <p>It results in significantly longer payment periods</p> Signup and view all the answers

    What is a reason mentioned for not sending invoices once a month?

    <p>It could lead to less proactive collection efforts</p> Signup and view all the answers

    Which factor is essential for improving collection results in businesses?

    <p>Streamlining the billing process effectively</p> Signup and view all the answers

    What action should salespeople take when notified of a credit hold?

    <p>Place a courtesy call to the purchasing agent.</p> Signup and view all the answers

    Why might fee evaluation be misleading when selecting a collection agency?

    <p>Low fees may lead to inadequate collection efforts.</p> Signup and view all the answers

    What should be done before selecting a collection agency?

    <p>Check references and gather feedback on performance.</p> Signup and view all the answers

    What is a common misconception regarding bad debt write-offs?

    <p>Too stringent credit policies can hinder sales performance.</p> Signup and view all the answers

    When is it advisable to turn accounts over to a collection agency?

    <p>While there is still a reasonable chance of collection.</p> Signup and view all the answers

    Which question is NOT recommended when checking references for a collection agency?

    <p>What are the agency's fees?</p> Signup and view all the answers

    What is a potential downside of very low fees charged by collection agencies?

    <p>They may lead to a rush to collect without careful analysis.</p> Signup and view all the answers

    What is a common barrier that companies face in turning accounts over to agencies?

    <p>Desire to collect the debts internally.</p> Signup and view all the answers

    What is one of the main objectives of spelling out the terms of sale and penalties in the credit application?

    <p>To prepare for collection efforts</p> Signup and view all the answers

    Which of the following is a recommended approach for collection efforts?

    <p>Focus on largest accounts while managing smaller ones</p> Signup and view all the answers

    What method can be used to ensure invoices are correctly processed?

    <p>Make sure invoices are correct the first time</p> Signup and view all the answers

    What should be done the moment an account is put on credit hold?

    <p>Notify both the customer and the salesperson</p> Signup and view all the answers

    How can training new customers contribute to improved collections?

    <p>By explaining due dates and collection policies early</p> Signup and view all the answers

    What is an effective way to maintain communication while following up on payments?

    <p>Send friendly reminders to keep channels open</p> Signup and view all the answers

    Which behavior should be avoided during collections calls?

    <p>Being confrontational and disrespectful</p> Signup and view all the answers

    What is the benefit of using email in collection efforts?

    <p>It can be used judiciously to enhance communication</p> Signup and view all the answers

    What is one major benefit of electronic invoicing?

    <p>It reduces costs and eliminates rekeyed mistakes.</p> Signup and view all the answers

    Why might electronic invoicing reduce the blame on mail processing issues?

    <p>Because invoices are no longer sent through typical mail systems.</p> Signup and view all the answers

    What is a common approach many consider most successful for generating payments?

    <p>Making phone calls to customers.</p> Signup and view all the answers

    What is a recognized trend regarding customer payment behaviors?

    <p>Customers are increasingly delaying their payments.</p> Signup and view all the answers

    How can effective billing practices impact a company's financial status?

    <p>They can result in faster collections and improved investment cash flow.</p> Signup and view all the answers

    What is the general consensus about the collection process in accounts receivable?

    <p>It starts when a credit application is taken.</p> Signup and view all the answers

    Which of the following does NOT represent an advantage of electronic billing?

    <p>Increased likelihood of processing delays.</p> Signup and view all the answers

    What factor drives the need for skilled collectors in the current business environment?

    <p>A trend of increasing delays in customer payments.</p> Signup and view all the answers

    Study Notes

    Billing Processes

    • Invoice: A bill containing information for customers to pay for goods or services.
    • Invoice Timing: Send invoices as soon as possible after shipment to ensure customers start the payment clock upon receipt.
    • Payment Terms: Clarity on payment deadlines is crucial, as most customers interpret "net 30" as 30 days from invoice receipt.
    • Invoice Contents: Include addressing, delivery details, product/service description, quantities, delivery location and date, amount, reference/purchase order number, order date, ordering person/department, payment conditions, payment method, and credit manager contact information.

    Invoice Tips

    • Avoid odd-colored or odd-sized paper for easier readability and imaging.
    • Ensure clear and legible printing, ideally with a modern printer.
    • Include contact information for customer inquiries.
    • Bold the due date for emphasis and clarity.
    • Review large dollar invoices for accuracy before sending to maximize discount opportunities.

    Electronic Billing

    • Process: Invoice delivery via the internet in electronic format, eliminating paper handling and enabling efficient data retrieval and storage in a network.
    • Benefits: Reduces rekeying errors, improves workflow, minimizes costs, and removes the "mail" excuse for delayed processing.

    Collection Processes

    • Many accounts receivables professionals believe that the collection process starts with the credit application.
    • General Tips: Be friendly with accounts payable managers, educate customers on payment terms, focus on large accounts, follow up frequently and persistently, create detailed sales agreements, keep detailed notes of promises and track their fulfillment.
    • Invoice Accuracy: Ensure accurate invoice data, notify both customer and salesperson about credit holds, maintain open communication, and follow up on promised actions.
    • Customer Support: Assist customers with problem resolution, train new customers on payment policies, treat everyone with respect, and emphasize prompt payment for new accounts.

    E-mail for Enhanced Collection

    • Strategic Utilization: Use e-mail judiciously to avoid junk mail categorization.
    • Sales Force Incentives: Withhold salesperson commissions until payment is received to motivate collection assistance.

    Collection Agencies

    • Selection Criteria: Focus on the agency's return on investment (ROI) rather than solely on fees.
    • Reference Checks: Verify agency performance through reference checks, including inquiries about their experience with the agency, their willingness to use them again, and their overall rating.
    • Agency History: Consider the agency's duration in business.
    • Timing: Submit accounts to the agency while there's potential for recovery.
    • Late Accounts: Avoid turning accounts over too late (e.g., after 6 months), as this can hinder collection efforts.

    Summary

    • Efficient billing practices accelerate collections, boosting investment income or reducing borrowing costs.
    • Electronic billing is an increasingly essential tool for cost cutting and efficiency.
    • Effective collection efforts are crucial for recovering outstanding payments.
    • Good communication and clear expectations laid out in the credit application set the stage for a successful collection process.
    • Collaborative and respectful relationships with customers and their accounts payable staff are vital for successful collection efforts.
    • The selection of a reliable and effective collection agency is essential for resolving complex collection issues.
    • It's important to embrace the reality of bad debt write-offs, as a balance between credit policy and maximizing sales and profit is essential.

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    Related Documents

    Accounts Receivable: Week 2 PDF

    Description

    Test your knowledge on billing processes and effective invoicing strategies. This quiz covers essential elements of invoices, timing, payment terms, and practical tips for creating clear and compliant invoices. Perfect for anyone involved in finance or customer service.

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