Week 4: Internal Control, Cash and Receivables - Discussion

Accounting for and Reporting Receivables (graded)

Receivables constitute an important line item on a company's balance sheet. In this thread, we will discuss the accounting for receivables, the ways to estimate uncollectible accounts, and how companies manage their receivables.

How do companies account for the possibility that some of their customers might not pay down the road?

Responses

Responses are listed below in the following order: response, author and the date and time the response is posted. Response Author Date/Time Welcome to week 4 3/10/2013 11:06:27 AM threaded Professor Wilson discussions! Class,

As we consider start week 4 postings, please consider the following:

Receivables constitute an important line item on a company's balance sheet. In this thread, we will discuss the accounting for receivables, the ways to estimate uncollectible accounts, and how companies manage their receivables.

How do companies account for the possibility that some of their customers might not pay down the road?

Prof Wilson

RE: Welcome to week 4 Geri Waldbillig 3/24/2013 12:59:40 PM threaded discussions! " When the Customer Won't Pay

First things first Fend off collections problems from the start by running credit checks on new clients and by discussing your prices, service fees and payment requirements with new customers before you do their work.

If you work on a retainer basis or provide services under a contract, make it clear what services you will charge for, what deliverables the customer will get for the fee, and what work will incur additional charges. Be sure to let the customer know how often you will bill and how long they will have to pay each bill. Put it all in writing and be sure to include a section about your rights and responsibilities regarding ownership of products, intellectual property or records of work you perform if bills are not paid. (Have your attorney draw up a boilerplate agreement that will work for most customers or clients.)

Keep an eye on receivables Send out your invoices promptly at regularly scheduled intervals. Be sure the client can tell that your mailing is not just another routine reminder. You may want to stamp the envelope "Invoice Enclosed" so it doesn't accidentally get thrown out.

Send out reminder notices promptly to any client who doesn't pay within a predetermined time frame - usually ten to 30 days.

If a client still doesn't pay after reminders are sent, have someone from your accounts receivable department call the late-payer and try to determine the cause. If you don't have an "accounts receivable department" have a spouse, secretary or bookkeeper play the role. If the customer is one you want to keep and is worth keeping, using such an intermediary will make it easier to maintain a good working relationship with the customer after the bills get paid."

Attard, Janet, When the Customer Won’t Pay, Businessknowhow.com;