Question

You have been hired at a dental office as the administrative dental assistant. The practice accountant informs you that the accounts receivable is high. What ideas do you have to help reduce the amount of money owed to the dental practice? What can you do to control new charges?

Answer 1

Nowadays most of the organisations uses credit system for business practices. Outstanding accounts receivables are among the most significant issues that businesses face.The management shuld take necessary steps to reduce the accounts receivables.

1)State payment terms clearly on invoices: Terms and conditions are good practice for businesses to ensure that the custumer is aware of credit policy of the organiasation.Charge ineterest or penalty If payment are not made within the time prescibed.This will results in decrease in outstanding accounts receivables.

2)Use factors services:Factoring service includes specialised services relating to credit investigation,purchase and collection of debts,credit protection as well as provision of finance against receivables and risk bearing.In factoring, factors taken over the accounts receivables of the organisation and bears the credit risk associated with the accounts receivables purchased by it.They charges commision for this service.But the firm can convert accounts receivables into cash without bothering about repayment.

3)Discount policy:This is a credit policy used by different organisation to ensure repayment within a prescribed time period.Under this method rate of cash discount,cash discount period,Net credit period etc are mentioned in invoice.example:Discount policy may be expressed as "3/15 net 60". This means that a 3% discount will be granted if the customer pays within 15 days.Normal credit period without discount is 60 days.

4)Control of receivables:This requires administrative officer to follow up debtors and decide about a suitable credit collection policy.It involves both laying down of credit policies and execution of such policies.

5)Credit Analysis: This requires the administrator to determine as to how risky it is to advance credit to a particular party.The administrator required to investigate credit worthiness of debtors to reduce bad debt risk associated with accounts receivables.

When an organisation follow credit system,there are many risk factors associated with it.Therefore management of accounts receivable is an important issue and requires proper policies and their implementation.