Understanding Accounts Receivable and Its Procedures

Accounts Receivables | FOS Desk

For a better understanding of accounts receivable, let’s start from its beginning to understand it more clearly.

It all started around 2000 B.C. when the Mesopotamians invented accounts receivable, a type of factoring similar to what we use today, by allowing merchants to buy things and pay later.

In today’s business world, managing accounts receivable is a critical aspect of financial management. However, with FOS Desk, it is not rocket science.

Accounts receivable are funds due to a business from its customers for products or services rendered.

Accounts receivable management is critical for maintaining a healthy cash flow, paying bills, and investing in growth. In this post, we’ll look at the significance of accounts receivable, its methods, and how to simplify them for maximum payment collection. Whether you’re a seasoned entrepreneur or just getting started, knowing accounts receivable may make or break your financial success.

Importance of Accounts Receivable

Accounts receivable are a valuable asset for companies that offer products or services on credit. It reflects money due to the firm and is an important aspect of evaluating cash flow. Effective accounts receivable management may help firms maintain a healthy cash flow and ensure they have enough funds to cover their own bills and invest in growth.

Procedures for Managing Accounts Receivable

The procedures for managing accounts receivable typically involve the following steps:

Invoice Creation: The first step in the accounts receivable process is to create an invoice. The invoice should include the customer’s name and address, a description of the products or services provided, the total amount owed, and payment conditions.

Sending Invoices: After creating the invoice, it must be sent to the customer. Invoices must be delivered as soon as possible to collect payments on time. This can be accomplished by email, mail, or an online portal.

Follow-up: Accounts receivable follow-up is a vital aspect of the process. This includes keeping track of payment deadlines and following up with clients who have not paid on time. This can be accomplished by phone calls, emails, or letters.

Payment Collection: Receiving money from a consumer and documenting it in the company’s accounting system is what payment collection entails. This is a vital step in ensuring that the organization has enough finances to satisfy its own financial responsibilities.

Streamlining Accounts Receivable Procedures

Streamlining accounts receivable procedures can help businesses improve payment collection and reduce the risk of overdue accounts.

Here are some ways to streamline accounts receivable procedures:

Set Clear Payment Terms: Setting clear payment terms upfront can help reduce the risk of late payments. This includes specifying the payment due date, payment methods accepted, and any penalties for late payment.

Use Electronic Invoicing: Computerized invoicing can help you save time and limit the possibility of mistakes. Customers may also pay invoices online, which can aid in payment collection.

Automate Follow-Up: Follow-up automation can help firms remain on top of past-due accounts without needing a large amount of time and resources. This can be accomplished through the use of email reminders or automated phone calls.

Offer Incentives for Early Payment: Offering incentives for early payment, such as discounts or freebies, can encourage customers to pay invoices promptly.

Use Accounts Receivable Software: Accounts receivable software may assist in the automation and simplification of the whole accounts receivable process, from invoice production through payment collection. It can also provide useful information about payment trends and client behavior.


Handling accounts receivable is critical for every organization that wishes to maintain a healthy cash flow and financial stability. Effective practices for handling accounts receivable may help organizations enhance payment collection and decrease the risk of late payments.

Businesses may expedite their accounts receivable operations and assure prompt payment collection by establishing clear payment conditions, employing electronic invoicing, automating follow-up, giving incentives for early payment, and using accounts receivable software.

Have any doubts regarding the logistics documentation process? Don’t worry, our experts are here to help you with everything regarding logistics, as we provide end-to-end customer service that will guide you through the entire process.