Accounts Receivable Collections

Definition

Accounts receivable collections is the process of collecting payments from customers who have purchased goods or services on credit. This process involves tracking customer payments, sending invoices, and following up on overdue payments. Accounts receivable collections is an important part of managing a business's cash flow and ensuring that customers pay their bills on time.

Example

For example, a business may offer its customers the option to purchase goods or services on credit. The business will then send an invoice to the customer for the amount due. The customer is then expected to pay the invoice within a certain period of time. If the customer does not pay the invoice within the specified time frame, the business will need to take steps to collect the payment. This may involve sending reminder emails or letters, making phone calls, or even taking legal action.

Why it Matters

Accounts receivable collections is an important part of managing a business's cash flow. Without effective accounts receivable collections, businesses may find themselves unable to pay their own bills or invest in new opportunities. Additionally, accounts receivable collections can help businesses maintain good relationships with their customers by ensuring that payments are made on time. Finally, accounts receivable collections can help businesses identify customers who are at risk of not paying their bills, allowing them to take steps to mitigate the risk.