Accounts receivable Outsourcing processes deal with the cash flow of the business in Kochi, Kerala. 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 Kochi, Kerala 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 Kochi, Kerala

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

Kerala situated on the south-west part of the country, a land on the Malabar Coast with almost 590 km of coastline, palm facing beaches, a thick network of canals, wild-life reserves, hill stations, back-waters and picturesque locations make this state the most sought out tourist destination of Asia. Popular equally among both foreign and Indian tourist, it is known world-wide for Ayurvedic Kendras operating here which is the root cause for medical tourism. Numerous hospitals maintain high class standards of healthcare facility, sophisticated equipment and infrastructure to focus on foreign patients. As high as 11 Mn foreign and domestic tourist were recorded during 2019 with an enormous growth of 17.2%.

Kerala, the land of traditional dance form Mohiniyattam, set examples for other states in terms of high life expectancy, lowest population growth, highest literacy rate, best ratio of females to males and good scores on human development indicators in the country. This is evident from the fact that Kerala has the highest density of tele-networking and penetration of optical fibre cable across the nation. Also a complex arrangement of road and rails make it easy to commute and accounts towards the impeccable progression of the zone. It enjoys the privilege of the first and only state to have connected with 4 international airports of Kozhikode, Kochi, Kannur and Thiruvananthpuram. Closeness to the global maritime trade route crossing the Indian Ocean region alongside Kochi International Container Trans-shipment Terminal (ICT) at Vallarpadam, India’s very first ICT has made trade and communication even easier and faster for the residents and offers plethora of prospects for advancement and parity with the world.

Largest producer of rubber in India, Kerala’s export income from food-processing industries is two-third of the aggregate value of its total exports from the region and is the principal exporter of spices, cashews, pickles, coffee, coir and marine products. It is the heftiest producer of coir and coconut in the country and also as big as 75% of the share of spices coming from this region.

Investment opportunities in Kerala aggregate to over $ 674.59 bn, comprising of 978 projects out of which 5 are private and 973 are Government funded projects, with 136 promoters involved and spread across 14 districts which makes Kerala a paradise for progression in the commercial, industrial, technological and tourism fronts simultaneously.

Benefits of Accounts Receivable Outsourcing Services in Kochi, Kerala

Accounts receivable outsourcing in Kochi, Kerala 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 Kochi, Kerala:

Quicker Payment Realisation

Accounts receivables outsourcing helps the company in Kochi, Kerala to collect the payments from its buyers in Kochi, Kerala 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 Kochi, Kerala 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 Kochi, Kerala

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

Establish Credit Policy

Any organization in Kochi, Kerala 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 Kochi, Kerala

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.