Accounts receivable refers to the outstanding payments owed to a company by its customers for goods or services provided on credit. It represents the amount of money that a company expects to receive from its customers in the near future. Accounts receivable is considered an asset on a company’s balance sheet and is typically recorded as a current asset. It is an important aspect of a company’s financial management as it represents the company’s ability to generate cash flow and meet its financial obligations. Managing accounts receivable involves tracking and collecting payments from customers, monitoring aging of receivables, and implementing strategies to minimize bad debts and improve cash flow.
Answer: An account receivable is a legally enforceable claim for payment held by a business for goods or services that have been provided but not yet paid for by the customer.
Answer: You can manage your account receivables by setting clear payment terms, sending timely invoices, following up on overdue payments, and implementing a collections process.
Answer: Yes, you can charge interest on overdue account receivables, but you must comply with state and federal laws regarding interest rates and disclosure requirements.
Answer: Your legal options may include sending demand letters, filing a lawsuit, or hiring a collections agency to pursue the debt.
Answer: Yes, you can sell your account receivables to a third party, but you must comply with state and federal laws regarding debt sales and collections.
Answer: If a customer declares bankruptcy, you may be able to file a claim with the bankruptcy court to recover the debt, but your chances of recovery will depend on the type of bankruptcy and the customer’s assets.
Answer: Yes, you may be able to write off uncollectible account receivables as a bad debt expense on your taxes, but you must meet certain IRS requirements and limitations.
Answer: The consequences of violating debt collection laws may include fines, lawsuits, damage to your business reputation, and loss of your debt collection license.
Answer: You can prevent account receivable disputes with customers by setting clear payment terms, providing detailed invoices, communicating regularly with customers, and resolving any issues promptly and professionally.
Answer: The benefits of outsourcing account receivable management may include improved cash flow, reduced administrative costs, increased collections efficiency, and access to specialized expertise and technology.
This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.
This glossary post was last updated: 12th April 2024.
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