What Accounts Receivable Mean for the Company
Buyers, in rare occasions, do not have full cash to make their purchase especially if what your company sells is a big investment or service – like cars and more, and the most obvious move you’ll do would be to let them give you money in the near future.
It may seem like pure generosity and a show of goodwill but in truth, it is still something that will benefit the company at the end as it is another way for them to gain cash out of their customers which is often termed as the company’s accounts receivable.
For those people who becomes debtors of a company and have to recompense the company for the purchase they have made, they will receive information about the purchase and credit in every month that passes, in the form of bill statements or invoice.
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The invoice and billings statement will contain the price of the purchase which the customer has made and also includes shipping fees and taxes that comes with the purchase.
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This basic concept is just common knowledge and something that many individuals could learn through classes or even the internet.
The matters of accounts receivable is easy to understand but if you delve in deeper to the matter and learn more about accrual and even the cash-basis accounting, you’ll surely find the whole matter to be more intricate than you expect.
You may be at loss at first how the company would be able to make money or gain advantage in accounts receivable and that can be answered through these methods of manipulating the entry and exit of money from the books of the company.
In this article, we will focus on one of the most used accounting method, the cash-basis method. This particular method is more often used by the company when the year is ending as it can help both the company and the customer be relieved from a certain amount of tax for another year. To make this method work, the company wouldn’t record a purchase if it’s bought on credit and in this way, the can just put the sale on the company’s financial books next year. What makes this method extremely beneficial for the company is its capability to allow the buyer and the seller to avoid paying the tax for that earning or that purchase until the next year.
It is true that the techniques and methods for Accounts Receivable management isn’t limited to the cash-basis and accrual accounting, but the former’s topnotch effect is something that any company wouldn’t want to miss out on as it can be very convenient and helpful for both the company and the seller.