Introduction And Meaning Of Receivable Management
In simple words, receivable management is a process of tracking, monitoring
and managing the outstanding invoices or credit sales. It helps the company
to maintain sufficient cash in the firm that ensures smooth functioning of
business activities. It is very helpful to minimize bad debts and maximize
the earning of the company.
Importance Of Receivable Management
The importance of effective receivable management can be highlighted as
follows:
1. Ensures Better Cash Flow
It helps to generate cash inflow in the business. It discourages overdue
payment and minimizes the risk of non-payment. It helps to maintain adequate
cash in the firm. So, it ensures better cash flow and smooth functioning of
business activities.
2. Minimizes Bad Debts
Receivable management helps to track and monitor credit sales made by the
company. It makes payment schedule that helps the company to follow up with
customers. Therefore, it lowers the chance of non-payment that minimizes the
risk of bad debt.
3. Increased Sales
Efficient receivable management system provides credit facility to the
customers. It helps to attract more potential customers which helps to boost
the sales volume.
4. Increased Profitability
As we know that receivable management helps to increase sales volume and
minimizes bad debts. It also helps to lower the cost of investment in
receivable. Because of increased sales and cost reduction, it helps to
increase the profitability or earning capacity of the company.
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5. Better Credit Policy
It helps to establish better credit policy that helps to increase customer
satisfaction. It also helps to improve the image and goodwill of the
business.
