Accounts receivable Outsourcing processes deal with the cash flow of the business in Mumbai, Maharashtra. 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 Mumbai, Maharashtra 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 Outsourcing Services in Mumbai, Maharashtra

The primary objective and the end goal of any business in Mumbai, Maharashtra are to maintain positive cash flow and maximize profits. Accounts receivable services in Mumbai, Maharashtra 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.

Maharashtra is the 3rd biggest state in terms of geographical area, i.e. 9.4% of the total area of the country. The state lies on the West coast and is well connected with in the country by a dense network of roadways stretching around 3,09,000 km and railway linkage of around 6,210 km within the state. It marks a strong presence on the air map with 4 international and 7 domestic airports. The shoreline of the state is nearly 720 km, with 55 ports which facilitate transportation of 22% of the total cargo transport of the country. Jawahar Lal Nehru Port Trust (JNPT) is located here and is linked with 46 Inland Container Depots (ICD), 34 Container Freight Stations (CFS). The state supports it’s industries with the installed power generating capacity of 43,000 MW.

The state has the highest GDP, 2nd highest FDI inflow during 2020-21 at 28% in the country and Ranks No. 1 in Export Preparedness Index in 2020. FDI for the period Oct -2019 – Sept 2020 aggregated over $10.8 Bn and for the period Oct -2019 to March 2021 the state’s contribution for the FDI was nearly $23.43 Bn. Mumbai, the state capital is popularly known as the Financial Capital of India and is home to most headquarters of all major corporate and financial institutions.

Information Technology is one of the key sectors of the state, accounting to more than 20% of the country’s software exports. Pune, Aurangabad, Nashik and Kohlapur are the major export cities from the region. The government has developed 37 IT parks and also approved 472 others and the State’s Industrial Policy offers policies regarding various infrastructural investments like exemption on filing patents and Knowledge Parks etc.

Maharashtra holds 30.5% share in industrial output of ESIDM sector. The state also has 3 Electronic Manufacturing Clusters (EMC) in Pune, Aurangabad and Navi Mumbai, with facilities for testing and R&D. Well established ESDM hubs are located in Khed and Talegaon in Pune. They enjoy locational benefits of being directly connected to JNPT and Mumbai port, the largest ports of the country.

With a robust presence, Maharashtra shares 35% of the total output of Automobiles by value with the assistance of committed manufacturers and a network of component suppliers and vendors. Major centres are located in Pune, Aurangabad, Nashik and Nagpur.

The state is the major producer of Arhar and Jowar, contributing 29.11% and 46.09% respectively to the aggregate yield of the country. Ranks #2 in the production of bananas, cashew, pulses, cotton and sugarcane. This region tops the chart in the production of Grapes and provides stimulation to the grape processing and wine industry with the help of dedicated wine policy and wine parks. 8 Food Parks and 3 Floriculture Parks with superior facilities are established here. Thus, Food Processing industry in the state is worth $158 Mn by way of 173 projects initiated during the years 1992-93.

An ace producer of cotton, bamboo and silk fibers, textile sector generates 2nd highest employment opportunities in the zone after agriculture. 14 private and 10 government textile parks are set up with plug and play facility. The government has launched Textile Policy to ensure various incentives to the sector by way of tax exemption, interest subsidy and up gradation subsidy, with a mission to generate 1 mn new job prospects by year 2023. Bombay High is the largest producer of offshore oil in India. Bollywood, world’s largest film industry in term of viewership is based out of Mumbai.

With a fairly good sex ratio in the state, 929 females per 1000 males. 66% of the total population of the region falls between the age group of 15-59 years and is the 2th most populous state of the country, with 112.4 million citizens residing i.e. nearly 9% of the country’s population, which is equivalent to the population of Mexico on their 1/6th of their land area. This state has 1 Central University, 23 State Universities, 21 Deemed Universities, 14 Private Universities, 885 Engineering Colleges, 227 Business Management Institutes, 438 Pharmacy Colleges and 474 Industrial Training Institutes.

The aggregate value of investment opportunities in Maharashtra is nearly $815.58 bn, comprising of a total of 1195 projects out of which 45 are private and 1150 are Government owned projects, with 242 promoters involved, spread across 39 districts of the state, which makes Maharashtra a perfect breeding ground for developmental projects in the commercial segment. Prestigious Government schemes are also running here like Pradhan Mantri Awaas Yojana Gramin which values about $59.38 bn, Pradhan Mantri gram Sadak Yojana Project costs a whooping amount of $50.24 bn, Wind Power Project worth $56.47 bn and Solar Power Project with aggregate value of $63.57 bn.

Benefits of Accounts Receivable Outsourcing Services in Mumbai, Maharashtra

Accounts receivable outsourcing in Mumbai, Maharashtra 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 in Ahmedabad, Gujarat:

Quicker Payment Realisation

Accounts receivables outsourcing helps the company in Mumbai, Maharashtra to collect the payments from its buyers in Mumbai, Maharashtra 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.

Efficiency

Managing the accounts receivable process in-house is a tedious task. The company in Mumbai, Maharashtra 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 Outsourcing Services in Mumbai, Maharashtra

Depending upon the size of the business in Mumbai, Maharashtra they carry different approaches towards Outsourcing Account Receivable processes. Large businesses in Mumbai, Maharashtra have the resources to invest in the manpower and latest tools and technologies. On the contrary medium and small size businesses in Mumbai, Maharashtra have a constraint of resources and tend to engage with account receivable services.

Establish Credit Policy

Any organization in Mumbai, Maharashtra 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.

Invoicing

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 Outsourcing 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 Mumbai, Maharashtra

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.

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Aristotle Consultancy, a leading platform specializing in tax, legal, and compliance solutions, is dedicated to assisting you with all your bookkeeping needs.