In: Operations Management
what do you think the life cycle of the accounts receivable should be?
Account receivable life cycle is start when we sell the product or services to customer for the earning the revenue.
In Account receivable the accountant create Invoice or statement of bill to customer which include the Selling price of product or service with taxes and the reference number of the product or name of service / product.
This Invoice or statement he send to the customer for billing and create the transaction entry in system for pending money from customer.
After the bill or invoice received customer take decision to provide full money or part of money or required deduction for failure of product or service. And as per decision he provide the money to customer.
If customer provide the full money than accountant make entry in system close the transaction.
But if the customer done any deduction than accountant have to make deduction entry and enter as loss in system.
If the customer don’t provide the amount of billing than the accountant have to knock off the entry from system and company will bear the loss for that amount.