Accounts receivables/ Debtor management

▬ What it is ▬

What is Accounts Receivables / Debts Management?

Accounts receivables (often called debts management) involve keeping track of the money that customers owe to a business. Here's how it works in simple terms:

Key Concepts of Accounts Receivables/Debts Management

Sales on Credit
When a business sells a product or service and allows the customer to pay later, the unpaid amount is called accounts receivable.
Invoice
The business sends an invoice to the customer, which is a bill showing how much is owed and the due date for payment.
Tracking Payments
The business keeps a record of all the invoices and monitors which ones have been paid and which ones are still outstanding (unpaid).
Collection
If a customer still doesn’t pay, the business might need to take further steps, such as hiring a debt collection agency or taking legal action to collect the money owed.

▬ Importance ▬

Why is Accounts Receivables/Debts Management Important for Small Businesses?

Managing accounts receivables is crucial for maintaining a healthy cash flow. Cash flow is the money coming in and going out of the business. If customers don’t pay on time, the business might run out of cash to pay its own bills.

Here are some Key factors:

Cash Flow

Financial Stability

Regular and timely payments from customers help ensure that the business can cover its operational costs, such as rent, utilities, and employee salaries.

Customer Relationships

Efficient debts management helps maintain good relationships with customers. Clear communication about payments and consistent follow-ups can lead to trust and repeat business.