With the current struggling economic conditions, the collection of accounts receivable is becoming more and more challenge each day. Strengthening your collection procedures may allow you to shorten the aging days of your accounts receivable and improve collection rates.
The following suggestions can help your business tighten up its credit and collections policies and improve its cash flow. Although some of the tips discussed here may not be suitable for every business, they can serve as general guidelines to help improve cash flow.
Define Your Policy. It's important to have a clear credit policy. Your sales force should not be able to sell to customers who are not credit-worthy, or who have become delinquent. Define and stick to concrete credit guidelines. You should also clearly delineate what leeway salespeople have to vary from these guidelines in attempting to attract customers.
Tip: A system of controls for checking out a potential customer's credit...
In Accounting there are plenty of formulas, theories, and equations, but by far the most important is the following:
Assets = Liabilities + Equity
First, I will describe in layman’s terms the three variables within the equation above. An asset is a resource that will be used to operate a business (e.g. inventory, plant, machinery). A liability is a creditors right to the resources within the business (e.g. loan, accounts payable). Equity is the owner’s interest in the business (e.g. stock, retained earnings).
Home ownership is an easy way to understand the relationship between the three variables. The house itself is an asset because it can be used to generate revenue from rent or a business can be ran within the home (e.g. daycare, tax preparation). The mortgage on the home is a liability because a mortgage is a loan from a bank. The home is collateral for the loan, so if the owner cannot pay back the loan the bank will be able to take ownership of the...
Defining the scope of a project is the process of developing a detailed description of the project and product (PMBOK, 2013, pg 105). According to Shelly and Rosenblatt (2011, pg 74), defining the scope means to precisely define the specific extent of the project. For example, a statement that reads "the project scope is to modify the accounts payable system", is not as specific as the statement "the project is to allow customers to inquire online about account balances and recent expense payments".
In the article by Khan, Project Scope Management, scope planning has an intermediate stage, but once the scope definition begins, details of the scope are identified down to the work package level (Khan, 2006, pg 14). Defining a scope can be extremely iterative. In project scope development, a high level vision will be developed initially for projects, but as more information is received about the project, the boundaries and scope of the project will be...