Outstanding receivables refer to debts owed to a firm. If a business agrees to supply products or give services and accept payment later, in terms like 30-day or 90-day payment, then those items qualify as outstanding receivables until they are paid off. One common receivable is the charge account i.e., if someone’s business sells items on credit, then the accounts become outstanding receivables until the debt is settled. In the following sections, we will discuss outstanding receivables, and how can they be reduced?
Obviation of outstanding account’s receivables is one of the main challenges faced by businesses today. Controlling and managing the outstanding receivables may be a challenge to stay on top. It not only just assists one in knowing what proportion their parties owe but also helps them to recover the dues on time.
Reducing Outstanding Receivables of a Company
Receivables mean the net debt owed to a corporation. When a business makes sales on credit, then it should keep a track record of the net amounts owed by the clients in return for the service or sales. Till this amount is paid it will be termed as outstanding receivables.
Effect of Delayed Payments on Businesses
There are no doubts that there will be some cases where late payments could happen due to misplaced invoices, income constraints, or due to some misunderstanding of payment terms. However, it is critical for any business that it features a proper workaround in place to deal with late payments.
The importance of timely payment is well understood by businesses all around the world. Delayed payments could be frustrating, and follow-ups are time-consuming. Therefore, the management of outstanding receivables should be on the priority list of any business. If there is a delay in outstanding payment, it can affect business and the owners might not be able to invest in other areas, which can obstruct their future investment plans and associated returns.
Give Clear Terms of Payment on the Invoice
Giving invoices without expectation of payment gives customers a vast time to pay. Therefore, confirm that the terms of payment are clear with the customer. Even the term i.e., “due upon receipt” is often ambiguous, thus leaving an excessive amount of space for interpretation of customers.
Update Customers on Invoice Maturity
If a client tends to pay dues later than the maturity date, then consider sending him/her a reminder. This shows to your customer that your business has an automated invoice tracking process to detect late payments. This system is used by many prominent companies across the world, especially in case of payment done by online methods. It is not wise to simply await the late payment and then contact the customer as they might take advantage of the leniency.
Sending Invoice to Customers
Businesses should consider sending invoices immediately. It is surprising to ascertain that businesses take an excessive amount of time to send invoices to their customers. An invoice must be dated and sent the day service is granted unless laid out in terms that were previously established with the customer. The earlier the invoice is shipped, the sooner one will get paid.
Initiate Action if Invoice is Overdue
The timing of this action might differ from company to company, but an invoice that is late every week deserves a follow-up action. Sending an email may help in this regard. It should contain details like the invoice number, net amount outstanding, and date of invoice maturity. Polite and non-threatening correspondence with a customer to give them a transparent reminder of what they owe goes a long way. In case further communication is needed with the customer, one can alternate between calls and correspondence. There will be an explanation for delayed payments which will prove helpful in understanding when the deliverables will be cleared. Such one-on-one interactions can open the scope of payment to a great deal.
How Conversations on Call Can Help?
There are occasions where people in a corporation change roles without notification to an outside partner organization. In such cases, a call can unveil the reasons for the delay in payments. However, such a call should be done in a courteous and professional manner so that the relationship with the company is not spoiled. Late payments should not put your business on hold just because some delinquent customers are busy and ditch invoices. It might be possible that some clients are negligent or unresponsive to repeated reminders. A business should make repeated conversations with them and once the dues are cleared, they should get rid of these clients.
Automate the Follow-up Process
Many high-end automated invoice systems make it easier for companies to send bills to clients automatically. This method is cost-effective and saves tons of time for Credit professionals who spend it in manual processing. Automated invoicing and follow-up process is easier to manage. Some tasks which can be automated include reprinting of invoices, maturity reminders, and communications related to overdue collections.
Understanding Financial Reporting
Financial reporting basically involves the disclosure of the financial information to different stakeholders. The report involves information on the financial performance and position of the organization. The stakeholders who get informed with financial reports are investors, the public, debt providers, and government agencies.
Financial reporting is completed by an organization or a firm to gauge the financial performance of the corporate in its previous fiscal year or quarter. In other words, financial reports give a detailed analysis of a corporation’s success and business performance in the past.
Objectives of Financial Reporting Services
The objectives of availing of Financial reporting service are as follows:
- To provide detailed data to investors, creditors, and promoters that will allow them to come up with prudent decisions related to business investment, credit, etc.
- To provide information to the management to analyse, optimize, and execute decisions related to company matters.
- To give an in-depth analysis of the company performance to the shareholders and the public (in the case of listed companies) regarding different aspects of the company.
- To give information on how the corporation is utilizing its available resources.
- To inform the statutory auditors and assist them in the audit process.
- To provide data to varied stakeholders related to their execution of fiduciary duties or responsibilities.
- To provide data about the available resources of the corporation and the way these resources have changed over time.
The necessity of Financial Reporting Services
Every organization understands the importance of financial reporting. The following points will illustrate the importance of these services for an organisation.
- Statutory audit is eased due to financial reporting. The statutory auditors can easily audit the financial statements of a corporation.
- With these services, organizations can create suitable rules and regulatory requirements for different departments. The organizations can also file financial statements on time to the ROC and other government agencies.
- Financial reports form the backbone of monetary planning, analysis and decision making.
- It helps in raising capital from overseas as well as the domestic market for organizations.
- Even the public can analyse the performance of the company by taking reference from its financials.
Common Types of Financial Reporting
Creating Income statement
This tells you the ways through which a corporation has made money during a specified time. It does so by giving information on the revenues earned against the expenses paid to point out the profit numbers of the corporate. A detailed breakdown of a company’s profit and loss is given in the income statement or the earnings report. The second sub-section of the earnings report gives info on the net income compared with losses of the company. The quantity of net profit/loss is obtained by subtracting the gross profit/loss margin with operational costs.
Cash Flow Statement
The Cashflow report shows what proportion of money has come in or out of the business over a period. It is an important component of the monetary reporting of the company. The inflow/outflow of the cash could be from any investment, operations, or financing activities. Cash flows obtained from operations focus on the day-to-day activities of the organisation.
The balance sheet is that part of financial reporting that has the information regarding the debt and obligations of the corporate. The dynamic assets are often recorded with the present assets. Non-current liabilities like bank overdrafts and trade payables are also recorded.
Benefits of Financial Reporting Services
Let us now check out the advantages of these services.
Improved Debt Management
Debts are something that harm the progress of a corporation regardless of the economic situation of the world. With financial reporting services, one can track the current assets divided by the present liabilities on the company’s balance. In this way, it helps in the management of the debts. With accurate and robust information by financial reporting, one can see improvement in financial efficiency over time. It also ensures that a business stays 100% compliant by submission of all the relevant documents on time. This is one of the most critical benefits of financial reporting.
Identification of Latest Trends
Irrespective of the financial activity you are tracing, all kinds of financial reporting services will assist you in spotting the latest trends. Therefore, it helps you to tackle any potential weaknesses and also helps you to make decisions that will benefit the general health of the business. With complete access to centralized and real-time insights, one can make accurate decisions by preventing any roadblocks and maintaining financial fluidity in tough times.
Optimizing Financial Health of Company
Availing Positive financial services reporting could be beneficial for the health of your business and increase its profit potential. Now, we take a glance at the ways to optimize the financial functions and the related reporting.
- Ensure to possess transparent future goals and articulate them in the company goals.
- Identify the financial insights or KPIs (key performance indicators) that can help make a suited decision to enhance the profitability of the company.
- Select the proper tools and software packages that can keep your information secure and accessible.
- Ensure that optimum internal controls are in place.
- Produce timely and easy to understand information.
- Use financial insights required for informed decisions and stay ahead of the competition.
Outsourcing Financial Reporting Services
Outsourcing services to an expert gives the following benefits:
- It saves the money required to hire new manpower and infrastructure.
- Save time for the process deliverables.
- A client can focus on the core business operation.
- Fast and accurate services from experts.
Accounting Outsourcing Services
Accounting is a vital function needed to performed by the organizations in each fiscal year. Adoption of suitable financial accounting procedures is important because it reflects the financial stability of the corporate. However, carrying accounting operations in-house could be very cumbersome & expensive. Also, maintenance of “books of accounts” is a difficult process due to constant changes in regulations & compliance requirements. Therefore, outsourcing accounting operations is preferred by big companies.
Benefits of Hiring Accounting Outsourcing Companies
Daily Tracking of New Accounting Rules
Continuous monitoring of accounting rules is not an easy task for a company. Therefore, it is always preferred to hire a firm specialized in performing accounting services. They will monitor all new changes to the accounting rules and implement them on time to avoid any issue arising due to non-compliance with service rules. These companies have dedicated experts who ensure that their client is under the good books of market regulators.
Scalability of Manpower
Few in house employees may not handle a vast quantity of information. A corporation that provides these services have many employees and thus they can increase or decrease the no. of employees as per the requirement of the business. They can easily handle extensive accounting entries and thus make sure that financial tasks are performed accurately and on time. With this, a company can engage its manpower in activities that are essential in achieving the goals of the company and redeploy them to other departments.
Access to Advanced Technology skills
Using the newest technology is extremely important during this era because it makes an excellent impact. There are many companies which aren’t conscious of the acceptable software for his or her company also as a number of the software are very expensive. Whereas, if we mention a firm which provides outsourcing services, they are equipped with the newest software & technology to satisfy the demand of their clients.
Flexibility & Security
A company gets a customized solution if they hire an outsourcing company. This is a critical benefit of hiring outsourcing accounting services. The flexibility in their operations as per the requirement of the company makes them appropriate for the partner company. Additionally, a company providing outsourcing accounting services follows strict rules to upkeep the security & confidentiality in their services. Taking assistance from a specialized consultancy firm ensures that the company’s financial data will be protected & stored securely.
There are a variety of risks involved in the handling of monetary services. If a company fails to handle its financials, then it can be penalized, and the promoters may face jail time. It is indeed a reality that a company’s promoters can avoid risks by outsourcing their financial services to a specialized firm. This will also reduce the danger of any internal fraud and eliminate stress. With this, the financials are going to be audited on time by professionals who will keep track of the financial activity of the company.
By outsourcing accounting services, a corporation can save at least 30% to 40% on the cost of hiring a new in-house accounting department. This enhances the profitability of the corporate and gives the advantage of completing financial tasks within the scheduled deadlines. With this, business owners can focus on achieving business goals by managing day to day affairs instead of being busy with the accounts of the corporate.
Ensure Timely Payroll
Employees work to get paid and as an employer one is ought to maintain a record of their effective working hours to manage productivity. It is important to ensure timely and accurate payroll. This can also be done by the outsourcing team. One will be able to easily access productivity data at any time and through cloud-based accounting, applications adjust the payroll.
Things to be Considered Before Outsourcing
Outsourcing Services can boost profits for a business and help in income or profit evaluation. However, few things must be considered before outsourcing services to any company:
- One can get a good idea of services provided by the corporate by contacting its references. You are ought to also check the corporate’s reputation by searching its review from the verified clients online.
- A company must evaluate the quotes with the services received from the outsourcing company. For that, they should discuss the quoted price in maintaining accounting services with other companies or market price.
Getting companies to pay dues based on invoices might be tricky, especially if they’re a large multi-faceted client. This is because they have multiple departments or teams of individuals to figure who is looking into the outstanding receivables. To ease out this issue companies should automate their invoice tracking services. The other thing we discussed in this article was financial reporting and accounting service outsourcing. Outsourcing the services to other companies with experts lets you focus on your core business. This also saves the cost and time of hiring new people.
These companies have modern technology and experts who can tackle the challenges of ever changing accounting rules. They are also proficient in using modern tools for financial analysis of the company records to create financial reports.