Accounts Receivable Outsourcing
Aristotle Company provides process oriented end to end Accounts Receivables solutions to the clients, which empowers them to focus on their core business. We help our clients to create and implement end to end Account Receivable process to ensure timely receipt of collection in a shorter duration of time, improve their collection rates and ensure faster processing of invoices which will all contribute to increasing the cash flow.
A quick look at the Accounts Payable solutions offered below, by Aristotle will help you understand the seamless and independent approach followed by our Accounts Payable team. Whatever might be possible reason for rejection of your plan by the VC but one thing that everybody needs to keep in mind to go long way is that “Even if we fail, we are still one step ahead of where we were earlier”.
The Benefits of Outsourcing Accounts Receivable
Our end to end Accounts Receivable solution offers wide range of benefits to client as mentioned below-
- Efficient & effective handling of process within defined SLA & TAT
- Review of SLA matrix, performance and TAT compliances
- Sharing of periodic Scorecards & Dashboards to management
- Standardized Process and adequate Internal Controls
- Quality Assurance
- Escalations to handle exceptions
- Scheduled reviews and meetings with client to fill any gaps
- Flexibility of Scale up-Down depending upon volume and complexities
- Cost effective Solution
Accounts receivable processes deal with the cash flow of the business in India. A positive cash flow is of utmost importance to any company. A business acquires customers and delivers products or services to them. An efficient account receivable process can help the business to lessen the burden of debts, meet the expenses and reach profitability.
Accounts receivable outsourcing services in India is a great way to save the business from piling up debts for the company since it ensures that maximum and timely payments are received from the buyers.
Overview of Accounts Receivable Services in India
The primary objective and the end goal of any business are to maintain positive cash flow and maximize profits. Accounts receivable services in India deal with this key function effectively and effortlessly to generate cash flow. A positive and healthy cash flow works like a lubricant for the smooth running of the business. An effective accounts receivables service ensures quicker payments by improving the collection rate of the business and ensuring faster processing of the sale invoices.
An inefficient accounts receivable process can massively affect the cash flow of the company and weaken its financial health. On the contrary, a strong account receivable service can help the company to produce higher incomes. Outsourcing of accounts receivable processes can bring successful results.
Benefits of Accounts Receivable Services in India
Accounts receivable outsourcing in India has immense benefits of saving time and money. Hiring services of a third party does not refer to just transferring of basic tasks, such as data entry, generating sale invoices but it results in a dramatic increase in the efficiency of the accounts receivable process. Let’s discuss various benefits that account payable outsourcing brings to the company:
Quicker Payment Realisation
Accounts receivables outsourcing helps the company to collect the payments from its buyers within the specified time as mentioned in terms of the business. Apart from this it also ensures no deferral in the payment collection. As the collection of overdue amounts gets delayed, it becomes more likely that the lesser sum the company will recover resulting in losing more money which affects the cash flow.
The agency also provides electronic invoicing and payment collection through electronic gateways of the banking system. The system is out in place to provide choices to the clients to pick the method of payment that they are comfortable with. It results in improving the income of the organization.
Managing the accounts receivable process in-house is a tedious task. The company needs to create infrastructure, hire the staff and train them. On the other hand, when the company outsources the accounts receivable services, it only needs to pay for the services that it has employed. The company saves time, money, and resources through outsourcing accounts receivable services and you can concentrate on important tasks to grow and expand the business.
Creating Effective Policy
The business should have a clear credit policy and should screen the customers from time to time to check if the same is followed and payments are being made in time. Accounts receivable management service provider keeps a track of customers who often delay the payments and also lists the clients who have a good credit history and make the payments before the due date. This screening helps the business to reset the pricing, discount rates, and other terms and conditions to do business with these different sets of clients.
Process of Account Receivable Services in India
Depending upon the size of the business they carry different approaches towards Outsourcing Account Receivable processes. Large businesses have the resources to invest in the manpower and latest tools and technologies. On the contrary medium and small size businesses have a constraint of resources and tend to engage with account receivable services.
Establish Credit Policy
Any organization must have clear credit policies while offering goods and services to its customers. The creditworthiness of the customer is the deciding factor for this policy. It tells if the goods on credit are to be offered to a certain group of customers or not. How much time of credit is to be offered for free. How much interest will be charged if the payments are overdue and if the payments are made before time how much discount could be offered. The company builds all such terms and conditions for credit that mentions the preconditions and commitments of the customers.
An invoice is the document of receipt that a client gets while purchasing any product or service. The invoice comprises certain data points, such as the date of purchase, unique invoice number, description of goods or services, the rate and quantity at which these have been offered, tax rate if applicable, and details of the payment date. The invoice can be given to the customer through an electronic form or physical form. Nowadays companies usually prefer electronic invoice which is both cost-effective and convenient and a service provider uses such modern software to generate invoices electronically.
Monitor Account Receivable
After the sale has been made and an invoice generated the next step is to follow-up accounts receivable. The accounts receivable service provider checks if the payment has been made to the supplier’s bank account. Update the same in the accounts receivable system and assign it with the invoice for the payment that was made. The service provider also reconciles the accounts receivable ledger to make sure that the payments have been posted accurately. Tt also issues monthly statements to the customers which helps in further reconciliation of the accounts from the customer’s end and provides information to the customer about the amounts he owes.
Accounts Receivable Collection
The accounts receivable team makes reminder calls to the clients from which the payment is due and a follow-up call to the customer from whom the payment is overdue. These calls help in removing any goof up and excuses from the customer’s side. The team also informs the customers about late fees or interest if the payment is delayed. It not only helps in screening the customer behavior as far as making the payment is concerned but also segregating them into different categories to decide if the company is willing to do further business with them or not. The is process also leaves a trail of calls that helps in strengthening the case, in case there’s any legal proceeding for the recovery of payments.
Accounts Receivables Services from Aristotle Consultancy
Aristotle consultancy provides end-to-end accounts receivable services such as:
- Processing of Sales Order
- Bookkeeping of accounts
- Electronic invoicing and billing
- Verification of invoice receipt by the customer
- Reconciliation of payments with sale invoice
- Sending monthly statements to the customers
- Creating debtor aging report for the management of the business
- Making payment reminder follow-up calls
- Implementing credit control tools and continuous monitoring of the same
- Managing customer help desk for accounts receivable services
- Dispute management
- Managing GST Form collection
- Managing Bad Debts / Delinquency
- Filing and handling of recovery suites if any
Aristotle consultancy offers expert accounts receivable outsourcing services to its clients with the best efficiency and accuracy of management of collections. We assist our clients to maintain solid cash flow by offering multiple services under the accounts receivable process. We the importance of customer relationships. Our team is professionally trained that completes the task of the account receivable process accurately to minimize the chances of errors. Our team of experts handles every account receivable outsourcing process with utmost efficiency and accuracy.
Checkpoints for Audit of Accounts Receivable in India
Accounts receivable are generally the largest asset in the balance sheet of any company thus auditors tends to spend a lot of time while auditing the accounts. Generally the following points are checked while auditing account receivables:
Match Trade receivable report with general ledger i.e matching the grand total of accounts receivable aging report for the period ending with the amount stated in the accounts receivable account in the general ledger. In case their is a mismatch, some journal entry is missing or in excess in the general ledger.
The auditors may sum up total amount of the invoices stated in the accounts receivable aging report and match it with the total they see in the general ledger.
For the journal entries stated in the accounts receivable account in the general ledger, the auditors may review the justification for the larger amounts. This signifies the proper explanation of the journal entries.
The auditors will select few sample of invoices from the accounts receivable aging report and match them to explanation or the supporting documentation in order to verify if the amount, customer name, date and other details are correctly documented or not.
The auditors may compare the date of invoice with the date of shipment for items stated in the shipping log. This is done to verify sales are being recorded in the relevant accounting period. This may involve verifying invoices issued even after the period being audited, to see if they should have been included in a prior period.
An auditor may even contact your customers directly in order to confirm the amounts due from them i.e the unpaid accounts receivable as of the end of the reporting period, being audited. Generally, this is done for accounts with larger balances however some random sampling even among smaller outstanding invoices may not be ruled out.
In case auditors are not been able to confirm accounts receivable, they may check for the customers who have paid the invoices. Generally in such cases, they will check copies and match them through your bank account.
The auditors may get into the process that is been followed to arrive on an allowance for doubtful accounts. This may include a consistency in the method when compared with that of last year and also analyzing whether the method is appropriate for your business environment.
The auditors may analyze the proportion of bad debt expense in comparison to the sales for given period and compare it with previous years. This is done to verify if the current expense seems to be reasonable.
The auditors may verify a sample of the credit memos issued during the audit period to check if they were issue only after proper authorization and in the correct period. Also they may analyze the circumstances or reasons of their issuance, which may indicate other issues. They may review credit memos issued even after the period being audited, to check if they relate to transactions from within the audit period.
In cases where billing to the customers is done for sales even without the full dispatch, the auditors may verify the documents supporting to determine the sales is actual or not.
While auditing accounts receivables, the auditors may verify the receiving log for customer returns especially the larger one that too after the audit period. This suggest that the company may have higher quantity of goods shipped near the end of the audit period than customers had asked for.
For the related party receivables, if any, the auditors may review the legitimate amount and also the account of booking as well. They will double check if these amount should instead be recorded as dividends or salary and whether they were properly authorized.
The auditors will definitely review a trends and correlation between sales and accounts receivable and compare it with previous years. Any unusual trends or may be noticed. Apart from this, comparison of account receivables to current assets will also be analyzed. They may also check for the average collection period. If so, expect them to make inquiries about the reasons for changes in the trends.
Accounts Receivable Audit Observations
The preceding list of audit procedures is designed to detect a variety of audit risks, which include the following:
That receivables does not exist.
That recorded receivable balances are not correct.
The chances of collection of accounts receivable are almost nil.
Derivation of the allowance for doubtful accounts may not properly reflect bad debt experience
That sales transactions were not recorded in the correct accounting periods
That revenue was incorrectly recorded.