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Accounts receivables are an inevitable part of business for certain companies. These are companies that dispose of items or services to clients without requiring cash upfront or through an installment plan. This is good on the part of consumers who will then be given the chance to take home something they want without having to pay for it upfront. On the part of the company, this can also be viewed from a positive light as it allows customers to delay their cash payments as a way of attracting even more customers. However, the bottomline is, when accounts receivables are not collected efficiently, this can mean losses to the company.
Losses to a company from longstanding accounts receivables can be big or small, depending on the nature of the company itself and the amount that is involved. A large business, for example, will be able to continue operating even when there are old accounts receivables that may have been causing losses for a while. In a scenario like this, a well-funded business will not find its AR to be crucially significant because it will still be able to function normally in any case. Of course, all invoices should be cleared and AR collected, whether the company is big or small, but when it comes to impact, effects on a big company will likely not be felt.
The case is different, however, for a small business which may rely signficantly on its cash flow for its day-to-day operations. For example, if you have just started a flower shop, the cash you receive from your customers will probably be the same money you'll spend for shipping and handling of orders, maintaining your workplace and other day-to-day expenses. If you are constantly having problems with AR issues, then it is probable that your daily operations will be compromised because your business, after all, relies on your cash flow to run itself. When there is a problem with this flow, then you can expect some days when you may start to wonder where you'll source the money to pay the courier service or even your assistant.
The larger businesses can opt to either have an in-house team that is dedicated to AR collection tasks, while others resort to AR financing, whereby the company outsources collection services to a business process outsourcing or BPO company. These are two options for businesses that can afford to pay an entire team of employees and extend benefits to them or to pay a BPO firm a fixed sum monthly for AR services.
Losses to a company from longstanding accounts receivables can be big or small, depending on the nature of the company itself and the amount that is involved. A large business, for example, will be able to continue operating even when there are old accounts receivables that may have been causing losses for a while. In a scenario like this, a well-funded business will not find its AR to be crucially significant because it will still be able to function normally in any case. Of course, all invoices should be cleared and AR collected, whether the company is big or small, but when it comes to impact, effects on a big company will likely not be felt.
The case is different, however, for a small business which may rely signficantly on its cash flow for its day-to-day operations. For example, if you have just started a flower shop, the cash you receive from your customers will probably be the same money you'll spend for shipping and handling of orders, maintaining your workplace and other day-to-day expenses. If you are constantly having problems with AR issues, then it is probable that your daily operations will be compromised because your business, after all, relies on your cash flow to run itself. When there is a problem with this flow, then you can expect some days when you may start to wonder where you'll source the money to pay the courier service or even your assistant.
The larger businesses can opt to either have an in-house team that is dedicated to AR collection tasks, while others resort to AR financing, whereby the company outsources collection services to a business process outsourcing or BPO company. These are two options for businesses that can afford to pay an entire team of employees and extend benefits to them or to pay a BPO firm a fixed sum monthly for AR services.
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