A report that is used as a tool for estimating potential receivables from the clients as per the scheduled due dates is called the Accounts Receivables Ageing Analysis.
Maintaining this kind of report helps to identify the invoices that are due beyond the payment terms and collecting efforts allowing following up on the slow paying clients.
Few of the advantages to focus and follow up on the accounts receivables:
– This report is used to get an idea on the accounts receivables’ volume that are due for payment and also helps in determining which receivable needs more focus and follow up.
– It helps management to take decisions regarding the financial forecasting based on the receivables.
– Most of the companies base their financial stability on the performance of their cash flows; hence they have a team that would focus only on monitoring the receivables. To achieve that the accounts receivable ageing report helps.
A company has a low turnover because it might have a poor paying clientele or inefficient receivables department, whose focus is not strong on collecting the amounts that are due as per the due date.
To have a good turnover rate, the company should either have good clientele who adhere to the timelines agreed or the receivables team who are very strong in collecting the dues as per the timelines agreed. If the problem of receivables is triggered properly then the company would have a sound turnover and successful business.