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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To give customers superior transparency and awareness of how much they’re going to pay, the billing statements and invoice are provided to them along with details on shipping fee and taxes they have to pay with the price of the product.
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If you’ve searched Accounts Receivable on the internet already or have been in an Accounting Class in the past, there’s no doubt that this concept and ideas aren’t new to you already. Making the matter more complex and more intricate than the introduction, there are two methods on which accounts receivable could go in the financial book of the company: one of which is the accrual accounting and the other is the cash-basis type. 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. If you want to learn more about the cash-basis method, then read on the article and be enlightened on how and why it’s more often used by companies. Amazingly, this Account Receivable management lends the company and the customer a hand in avoiding to pay a certain tax amount for a year and is more often fitter to be used during the end months of a year. What basically happens through this method is that the company wouldn’t put the cash flow on the financial book right after the purchase as they will just put it on the next year when the buyer finally pays for it. Through this technique, the buyer and the seller wouldn’t have to settle the payment of tax for that particular transaction not until the end of the year when it was finally placed on the financial book. 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.