Account Receivable - Best Practice Objectives,Accounts Receivable Objectives,Organisation,People,Processes,Controls,Measures,Information Systems,To ensure customer payments are received efficiently and effectively for goods/services delivered, within the agreed terms and conditions To manage credit risk efficiently without creating unnecessary delays in the sales cycle To maintain a complete and accurate statement of outstanding debtors To provide complete forecast information to assist the management of short-term cash requirements,Centralised processing Economies of scale Customer focus,Establish credit levels Issue sales order Issue invoice Monitor credit Collect cash,Procedures manual Authorisation Validation/matching Credit control,Cost per invoice Credit notes percentage Cost per payment received Days debt outstanding,Integrated with sales system Automatic matching Electronic receipts,Customer relations Legal framework awareness Credit management,Accounts Receivable - Best Practice Features,Process Features,Formal credit checks applied to all new customers within 24 hours using credit bureau Monitor credit status/terms on regular basis Customer account managers provided with up to date credit status Treasury policy set on late and prompt payments Authority levels clearly defined Credit policies defined and agreed Terms and conditions agreed with customers,Consolidated periodic invoicing for high frequency shipments Bank remittance notices issued with sales invoices to facilitate reconciliation Self billing invoices by high volume customers Consider outsourcing regular invoice/payment eg utilities Regular review of invoice queries and credit notes Reconciliation of AR balances to GL control accounts on a regular basis,Credit insurance arrangements evaluated periodically Customer account managers responsible for sales and cash collection Constant monitoring of debtor days, daily collection, ageing of debt Customer contact records maintained Outsource cash collection where appropriate Determine and report on credit targets Monitor overdue debts and take action within agreed policy,Establish credit levels,Issue sales order,Issue invoice,Monitor credit/ collect cash,Sales orders prepared using pricing database with pricing profiles for products and customers No order processed without valid customer PO reference Delivery note acts as invoice for low-frequency shippings,Accounts Receivable - Best Practice Features,Establish credit levels,Issue sales order,Issue invoice,Monitor credit/ collect cash,System Features,Consolidated credit position for group of customers System provides on-line customer payment history and terms Use of workflow software to monitor process and help resolve queries Standard credit control reports,Common SOP and AR customer database Invoices automatically generated from SOP and shipment data Self billing invoices automatically matched to customer orders Multi currency invoices Automatic commitment and accruals Automatic reconciliation facilities between integrated SOP AR and GL systems,SOP linked to debtors ledger to ensure customer credit limits not exceeded Sales documents sent via EDI for all major customers Integrated order & billing systems available on line & hard copy,Payments received electronically where possible Automatic matching of payments to invoices On-line diary facility to monitor calls Automatic flagging and reporting of high risk accounts Automatic dunning letters issued within agreed trading terms Integrated systems to facilitate customer query handling Forecast cash receipts available for treasury purposes,Accounts Receivable - Trends,From,To,Separate AR module Payment by cheque Complex/variable trading terms Manual matching Performed by Finance department,Integrated systems Electronic payment Common trading terms for all customers Automatic matching Shared or outsourced services,Accounts Receivable - Measures/Cost Drivers,90 percentile,Median,10 percentile,Number of customer payment received per accounts receivable,FTE per annum,40,300,5,500,700 or less,Accounts receivable cost per sales invoice processed,10 percentile,Median,90 percentile,1,3,18,Median,1 day,90 percentile,4 days,10 percentile,1 day,Days to process invoice/credit note (ie, time between receipt of invoice/credit note and entry into the accounting system),Cost drivers,Number of AR receipts Level of multiple receipts Use of direct debiting/standing orders Use of electric funds transfer Level of credit risk associated with customer base Variety in payment terms Degree of foreign currency receipts Level of credit notes,Billing - Measures/Cost Drivers,90 percentile,Median,10 percentile,Number of sales invoices generated per billing FTE per annum,90,000,11,100,1,600,Billing cost per sales invoice and credit note processed,10 percentile,Median,90 percentile,1,2,22,Median,2 days,90 percentile,15 days,10 percentile,1 day,Days from despatch of