Question

What is The Importance Of Analyzing Accounts Receivable.

Accounts Receivable Financing : An alternative to bank financing for your small business

DISCUSS THE ABOVE STATEMENT BY TAKING EXAMPLE OF BUSINESS ORGANIZATION OF YOUR CHOICE. Answer in three pages

Answer 1

In the simplest terms, accounts receivable measures the money that customers owe to a business for goods or services already provided. Because the business expects the money in the future, accountants include accounts receivable as an asset on the business’s balance sheet. (Learn more in Breaking Down the Balance Sheet). However, most businesses do not expect to collect 100 percent of the money shown in accounts receivable.

Given this risk of non-payment, why do business continue providing goods and services without requiring payment in advance? When dealing with regular and reliable customers, a business can benefit from selling its goods and services on credit. It may be able to make more sales that way and also reduce transaction costs. For example, the business can invoice reliable customers periodically instead of processing numerous small payments.

Accounts receivables are a business asset: They represent the money your customers owe your small business. They also can be used to get financing for your small business. Your business will get cash up front for part of the value of the accounts receivables, even before your customers pay their invoices.