case study on receivable management

• Receivables Management – Case Study of TCS

Table of Contents

Tata Consultancy Services (TCS) is a global IT services and consulting company, known for its excellence in technology solutions. In this case study, we will delve into TCS’s receivables management strategies, which have played a crucial role in maintaining its financial stability and growth.

Introduction to Tata Consultancy Services (TCS)

TCS is a part of the Tata Group, one of India’s largest and most respected conglomerates. Founded in 1968, TCS has grown to become one of the world’s largest IT services firms, with a presence in over 46 countries and a diverse portfolio of services, including consulting, technology, and outsourcing.

The Significance of Receivables Management

Receivables management is vital for TCS for several reasons:

• Client-Centric Model: TCS operates on a client-centric model, with a substantial portion of its revenue coming from long-term contracts. Managing receivables ensures timely collection of payments from clients.
• Working Capital Efficiency: Efficient receivables management optimizes working capital, allowing TCS to allocate resources for investments, growth, and innovation effectively.
• Financial Stability: Effective management of receivables contributes to financial stability, enabling TCS to weather economic fluctuations and invest in future growth.
• Client Relationships: Timely collection of receivables helps maintain positive client relationships, which are critical for repeat business and referrals.

TCS’s Receivables Management Strategies

1. client credit evaluation.

TCS conducts thorough credit evaluations before engaging with clients. This includes assessing the client’s financial stability, payment history, and creditworthiness. Establishing credit limits helps mitigate the risk of non-payment.

2. Clear Payment Terms

TCS sets clear payment terms in its contracts, specifying payment schedules, invoicing procedures, and penalties for late payments. This transparency ensures both parties understand their obligations.

3. Real-Time Monitoring

TCS employs real-time monitoring systems to track outstanding receivables, aging reports, and payment patterns. This allows for proactive follow-up and resolution of payment delays.

4. Dedicated Collections Teams

TCS has dedicated collections teams responsible for managing receivables. These teams engage with clients to resolve issues, provide support, and ensure payments are received as per the agreed terms.

5. Invoice Automation

TCS leverages automation for invoicing and payment processes. This reduces manual errors, accelerates invoice delivery, and expedites the payment cycle.

6. Client Collaboration

TCS maintains open lines of communication with clients regarding receivables. Collaborative discussions often lead to mutually beneficial solutions in case of payment challenges.

7. Diversification

Diversifying its client base across industries and geographies minimizes concentration risk. This approach ensures that TCS is not overly reliant on a small number of clients for its receivables.

The Impact of Effective Receivables Management

TCS’s receivables management strategies have yielded significant benefits:

• Cash Flow Stability: Effective management ensures a consistent cash flow, reducing the risk of liquidity issues.
• Working Capital Optimization: Optimized receivables contribute to efficient working capital management, allowing TCS to allocate resources strategically.
• Client Relationships: Timely collections help maintain positive client relationships, fostering long-term partnerships and repeat business.
• Financial Stability: Effective receivables management enhances financial stability, enabling TCS to navigate economic challenges.

TCS’s success as a global IT services leader is not solely attributed to its technical prowess but also to its meticulous receivables management. By focusing on client credit evaluation, clear payment terms, real-time monitoring, and dedicated collections teams, TCS has maintained its financial stability, strengthened client relationships, and supported its continued growth and innovation.

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Working Capital Management

1 Conceptual Framework

• Definition of Working Capital
• Constituents of Working Capital
• Types of Working Capital
• Cyclical Flow and Characteristics of Working Capital
• Planning for Working Capital Working Capital and Inflation
• Trends in Working Capital

2 Operating Environment of Working Capital

• Monetary and Credit Policies
• Financial Markets
• Economic Liberalisation and Industry

3 Determination of Working Capital

• Determination of Working Capital Needs: Different Approaches
• Factors Influencing Determination
• Tandon Committee Norms
• Present Policy of Banks

4 Management of Receivables

• Credit Policy
• Credit Evaluation Models
• Monitoring Receivables
• Collecting Receivables
• Strategic Issues in Receivables Management

5 Management of Cash

• Motives of holding cash
• Determinants of Cash Flows
• Cash Forecasting
• Managing Uncertainty In Cash Flow Forecast
• Managing Surplus Cash
• Electronic Funds Transfer and Anywhere Banking
• MIS in Cash Management

6 Management of Marketable Securities

• Need for Investments in Securities
• Types of Marketable Securities 
• Market for Short-term Securities
• Optimisation Models
• Strategies for Managing Securities

7 Management of Inventory

• Components of Inventory
• Need for Inventory
• Inventory System
• Costs in Inventory System
• Optimising Inventory Cost
• Selective Inventory Control Models
• Inventory Management Under Uncertainty
• Emerging Trends in Inventory Management

8 Theories and Approaches

• Creation of Value through Working Capital Management
• Approaches to Working Capital Investment
• Approach to Financing Working Capital
• Effect of Choice of Financing on ROI

9 Payables Management

• Payables: Their Significance
• Types of Trade Credit
• Determinants of Trade Credit
• Cost of Credit
• Advantages of Payables
• Effective Management of Payables

10 Bank Credit – Principles and Practices

• Principles of Bank Lending
• Style of Credit
• Classification of Advances According to Security
• Modes of Creating Charge Over Assets
• Secured Advances
• Purchase & Discounting of Bills
• Non Fund Based Facilities
• Credit Worthiness of Borrowers

11 Other Sources of Short Term Finance

• Public Deposits
• Commercial Paper
• Inter-Corporate Loans
• Bonds and Debentures
• Factoring of Receivables

12 Working Capital Management in SMES

• Small & Medium Enterprises Vs. Large Companies
• Role of Small and Medium Enterprises in India
• Working Capital Management for SMEs – Differential Features
• Working Capital Cycle
• Objectives of Working Capital Management in SMEs
• Managing Working Capital
• Determinants of Working Capital in SMEs
• Components of Working Capital Management
• Effective Working Capital Management for SMEs
• Strategic Planning – Strengthen Working Capital Performance

13 Working Capital Management in Large Companies

• Significance of Working Capital Management
• Large and Small Firms – Financing Options
• Differences in SMEs and Large Companies Working Capital
• Factors Affecting Large Companies Working Capital Needs
• Impact of COID-19 Pandemic
• Working Capital Efficiency Improvement- During Pandemic
• Strengthening Operational Agility – Strategic Partnerships

14 Working Capital Management in MNCS

• Special Issues of concern: Operational Environment
• Cash Management
• Receivables Management
• Inventory Management

15 Case Studies 

• Cash Management in Paytm
• Inventory Management – Case Study of Maruti Suzuki India Ltd.
• Financing of Working Capital by Commercial Banks – Case Study of SBI

Top 10 Accounts Receivable Management Best Practices

November 9, 2022

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Efficiently managing accounts receivable is a cornerstone of financial stability for any business. It underpins the seamless flow of cash and sustains a healthy bottom line. However, in today's fast-paced business landscape, marked by rapid transactions and evolving market dynamics, accounts receivable management presents its challenges.

These challenges, ranging from delayed payments to communication bottlenecks, can hinder cash flow and strain client relationships. In the face of these obstacles, implementing best practices becomes beneficial and imperative.

This blog delves into top accounts receivable management best practices and a comprehensive guide to navigating the challenges and optimizing financial processes.

According to the AR Pulse Check Survey of 2022, the data indicates that 52% of the respondents strongly believe in digitizing Accounts Receivable as a critical factor for attaining peak performance.

Accounts Receivable Management Example Case Study

GeBBS Healthcare Solutions faced significant challenges in managing their accounts receivable (A/R), which led to substantial aged debit balances and a slow cash flow cycle. The company needed to reduce the high volume of outstanding receivables and improve their overall cash performance. To overcome the challenges, GeBBS Healthcare Solutions implemented a comprehensive A/R cleanup and resolution strategy. Initially, the team identified the root causes of non-payment within their revenue cycle and recommended preventive measures. Next, they followed up with third-party payers and performed claims submissions according to a standardized operating procedure. They posted adjustments in real-time using the client’s Epic-based patient accounting system. Finally, the outstanding balances were transferred to self-pay status once the insurance balances were resolved. As a result of this approach, the firm reduced A/R from $68.2 million to $14.9 million within 11 months. It has achieved a net collection of $11.9 million, representing a 17.4% collection ratio. The company also realized a 27-to-one return on investment, significantly boosting cash flow and net revenue. (Source: ‘FTI Consulting’ )

Why is Efficient Accounts Receivable Management Important?

Effective accounts receivable management is crucial for maintaining the financial well-being of businesses. It ensures a steady cash flow for covering operational costs, investments, and growth strategies. One real-world example illustrating the importance of this management is the case of a small manufacturing company.

Imagine a manufacturing company that supplies materials to various clients. They follow best practices for accounts receivable management, sending clear and detailed invoices promptly after each transaction. They also utilize automated reminders for payment deadlines and offer various payment options, making it convenient for clients to settle dues. As a result, the company experiences fewer delayed payments and disputes.

This efficient management keeps the company's cash flow consistent and fosters stronger relationships with clients. The company's reliability and professionalism contribute to customer loyalty and referrals. In contrast, poor accounts receivable management could lead to delayed cash inflows, hampering the company's ability to meet its own financial obligations and capitalize on growth opportunities.

Accounts Receivable Management Process

A set of accounts receivable management best practices help businesses implement the below processes for an optimized financial stability.

• Credit Policies and Terms:
• Establish clear credit policies to determine customer creditworthiness.
• Define payment terms and conditions (e.g., net 30 days).
• Customer Onboarding:
• Evaluate new customers’ creditworthiness.
• Set credit limits based on risk assessment.
• Generate accurate and timely invoices using automated invoicing systems.
• Include all necessary details to avoid disputes (e.g., invoice number, due date, payment methods).
• Monitoring Receivables:
• Regularly review aging reports to track overdue invoices.
• Use accounting software to monitor outstanding receivables.
• Collections:
• Implement a systematic follow-up process for overdue invoices.
• Send reminders and make follow-up calls to ensure timely payments.
• Dispute Resolution:
• Address and resolve any invoice disputes quickly.
• Maintain clear communication with customers to resolve issues.
• Incentives for Early Payment:
• Offer discounts for early payments to encourage prompt settlement.
• Reporting and Analysis:
• Regularly analyze accounts receivable data to identify trends and issues.
• Adjust credit policies and collection strategies based on analysis.

What is the biggest challenge in accounts receivable?

Balancing the timely collection of outstanding payments with maintaining customer relationships poses a significant challenge in accounts receivable. Striking this balance ensures cash flow and minimizes the risk of bad debts. Read our blog ‘Top 6 Solutions to Overcome Accounts Receivable Challenges’ to learn how to overcome challenges in AR.

Accounts Receivable Problems and Solutions

• Late Payments:
• Problem: Customers frequently pay invoices late, affecting cash flow.
• Solution: Implement stricter credit policies, offer early payment discounts, and regularly follow up on overdue invoices.
• Inaccurate Invoicing:
• Problem: Errors in invoices lead to payment delays and disputes.
• Solution: Use automated invoicing software to reduce errors and ensure accurate billing.
• High DSO (Days Sales Outstanding):
• Problem: Extended collection periods increase DSO, affecting liquidity.
• Solution: Monitor DSO regularly, offer incentives for early payments, and establish clear credit terms.
• Poor Customer Communication:
• Problem: Lack of communication can lead to misunderstandings and delayed payments.
• Solution: Maintain regular communication with customers, providing timely reminders and updates on their account status.
• Inefficient Collection Process:
• Problem: Manual and disorganized collection processes hinder timely collections.
• Solution: Streamline and automate the collection process, using software to track and manage receivables efficiently.
• Unclear Credit Policies:
• Problem: Vague or lenient credit policies result in inconsistent payment behaviors.
• Solution: Develop and enforce clear, consistent credit policies and evaluate customer creditworthiness before extending credit.
• Customer Disputes:
• Problem: Frequent disputes over invoices delay payments.
• Solution: Address disputes promptly, ensuring clear and accurate documentation, and resolving issues quickly to maintain positive customer relationships.

To prevent these issues, businesses should adopt accounts receivable management best practices.

Accounts Receivable Management Best Practices

Here is the list of top 10 best practices for accounts receivable management.

1. Establish Clear Invoicing Procedures

• Clarity and Consistency: Well-defined invoicing procedures ensure uniformity in billing, reducing confusion for both clients and your team.
• ‍ Faster Processing: Clear procedures streamline invoice creation, leading to quicker deliveries and expedited payment processing.
• ‍ Dispute Resolution: Transparent invoicing minimizes errors, reducing the likelihood of disputes and fostering better client relationships.
• ‍ Professional Image: Clear invoices showcase professionalism, enhancing your brand's reputation and instilling trust in clients.
• ‍ Efficient Follow-Up: When procedures are clear, following up on overdue payments becomes smoother, helping maintain a healthy cash flow.
• ‍ Audit Readiness: Organized invoicing procedures prepare you for audits, ensuring accurate financial records and compliance with regulations.

2. Automate Invoicing and Payment Reminders

• Timely Reminders: Automation ensures prompt payment reminders, reducing delays and improving on-time collections.
• ‍ Resource Savings: Automated systems cut down manual intervention, saving time and allowing your resources to focus on strategic tasks.
• ‍ Consistency: Automated reminders maintain consistent communication, preventing missed reminders and maintaining professional interactions.
• ‍ Personalization: Automation can still incorporate personal touches, tailoring reminders to individual clients for a personalized experience.
• ‍ Escalation Process: Automation enables systematic escalation of reminders, helping manage overdue accounts more effectively.
• ‍ Cash Flow Optimization: Automatic reminders contribute to steady cash flow by reducing late payments and improving payment predictability.

3. Conduct Thorough Credit Checks and Onboarding

• Risk Mitigation: Thorough credit checks identify high-risk clients, reducing potential bad debts and financial risks.
• ‍ Informed Decisions: Detailed credit assessments aid in making informed onboarding decisions, ensuring clients align with your terms.
• ‍ Tailored Terms: Comprehensive checks allow the tailoring of credit limits and terms based on  customer creditworthiness.
• ‍ Relationship Building: Transparent credit evaluations establish trust with clients, fostering long-lasting and mutually beneficial relationships.
• ‍ Reduced Default Rate: Rigorous checks minimize the likelihood of default, enhancing the overall stability of your accounts receivable.
• ‍ Financial Health: Effective onboarding ensures clients can meet obligations, contributing to your financial stability and growth.

4. Offer Multiple Payment Options

• Flexibility: Offering diverse payment options accommodates various client preferences, enhancing customer satisfaction.
• ‍ Global Reach: Different payment methods cater to international clients, making transactions smoother across different regions.
• ‍ Faster Payments: Providing preferred payment modes expedites settlements, improving cash flow and reducing payment delays.
• ‍ Reduced Barriers: Multiple options eliminate barriers that might hinder payments, resulting in higher on-time collections.
• ‍ Adaptation to Trends: Embracing new payment technologies keeps you aligned with evolving industry trends and customer needs.
• ‍ Competitive Edge: Offering convenient payment choices sets you apart from competitors, attracting more clients to your services.

5. Provide Early Payment Discounts and Incentives

• Encourage Prompt Payments: Discounts incentivize clients to pay early, improving cash flow and reducing accounts receivable aging.
• ‍ Win-Win: Early payment benefits both parties, as clients save money while you gain improved liquidity.
• ‍ Strengthen Relationships: Incentives showcase your commitment to clients' success, fostering positive long-term relationships.
• ‍ Predictable Income: Early payments create a more predictable revenue stream, aiding financial planning and stability.
• ‍ Minimized Bad Debts: Timely payments lower the risk of bad debts, contributing to a healthier financial standing.
• ‍ Market Reputation: Offering incentives highlights your customer-centric approach, enhancing your reputation in the market.

6. Implement Late Payment Penalties

• Urgency for Payment: Penalties deter late payments, motivating clients to settle invoices promptly to avoid extra charges.
• ‍ Fairness: Clear penalty terms demonstrate transparency and fairness in dealing with overdue accounts.
• ‍ Compensation: Penalties compensate for the added costs and inconvenience caused by delayed payments.
• ‍ Cash Flow Stability: Penalties discourage late payments, contributing to consistent and healthier cash flow management.
• ‍ Prioritizing Payments: The prospect of penalties encourages clients to prioritize settling their invoices over other obligations.
• ‍ Improved Collection Rate: Implementing penalties enhances the likelihood of collecting outstanding payments and reduces aging accounts.

7. Maintain Effective Communication Channels

• Open Dialogue: Effective communication ensures clarity on payment terms, reducing misunderstandings and disputes.
• ‍ Addressing Concerns: Regular communication channels provide clients the opportunity to voice concerns, leading to quicker issue resolution.
• ‍ Building Trust: Transparent and consistent communication fosters trust, reinforcing strong client relationships.
• ‍ Payment Updates: Communication keeps clients informed about payment statuses, promoting transparency in the process.
• ‍ Customized Approach: Tailored communication allows for addressing individual client needs and preferences, enhancing satisfaction.
• ‍ Early Intervention: Open channels enable early identification of payment issues, allowing proactive solutions before they escalate.

8. Regularly Reconcile Accounts and Identify Discrepancies

• Accurate Records: Regular invoice reconciliation ensures your records align with client payments, minimizing errors and discrepancies.
• ‍ Timely Corrections: Identifying discrepancies allows for swift correction, preventing prolonged inaccuracies.
• ‍ Financial Clarity: Account reconciliation provides a clear financial overview, aiding strategic decision-making.
• ‍ Audit Preparedness: Regular reconciliation makes you audit-ready, reducing stress during regulatory reviews.
• ‍ Trust Building: Accurate accounts instill trust in clients, showing your commitment to transparent financial dealings.
• ‍ Efficient Dispute Resolution: Swift identification of discrepancies simplifies resolution, maintaining healthy client relations.

9. Utilize Key Performance Indicators (KPIs) for Tracking

• Data-Driven Insights: KPIs offer data-driven insights into accounts receivable performance, aiding informed decision-making.
• ‍ Measurable Progress: KPIs enable you to track progress over time, identifying areas for improvement and celebrating successes.
• ‍ Strategic Focus: Using KPIs directs attention to critical aspects like DSO (Days Sales Outstanding), guiding optimization efforts.
• ‍ Early Warning Signs: KPIs serve as indicators for potential issues, allowing proactive measures to prevent future problems.
• ‍ Goal Alignment: KPIs align with your business objectives, helping to measure AR effectiveness against overarching goals.
• ‍ Comparative Analysis: KPIs facilitate benchmarking against industry standards, helping you stay competitive and agile.

10. Monitor Aging Reports and Analyze Patterns

• Payment Trend Insight: Aging reports reveal payment patterns, enabling you to foresee and address potential delays.
• ‍ Proactive Approach: Regular monitoring allows for proactive engagement with clients before overdue accounts accumulate.
• ‍ Cash Flow Projection: Analyzing aging reports aids accurate cash flow forecasting, supporting financial planning.
• ‍ Prioritized Actions: Aging reports help prioritize follow-ups, focusing efforts on accounts most in need of attention.
• ‍ Customized Strategies: Patterns from aging reports guide tailoring strategies for different client segments, optimizing results.
• ‍ Process Enhancement: Insights from aging analysis inform process improvements, leading to smoother accounts receivable management.

Accounts Receivable Management Software for Small Businesses

There are several accounts receivable management software options tailored for small businesses to streamline invoicing, payments, and collections. Businesses should utilize one of these software apart from following accounts receivable management best practices. Here are a few popular choices:

• Known for its user-friendly interface, FreshBooks offers features like automated invoicing, payment reminders, and expense tracking, ideal for freelancers and small businesses.
• QuickBooks Online
• A comprehensive accounting software that includes accounts receivable management features such as invoicing, payment processing, and customizable payment reminders.
• Wave Financial
• Free accounting software that includes invoicing, recurring billing, and payment tracking functionalities, suitable for freelancers and small businesses on a budget.
• Zoho Invoice
• Offers invoicing, payment reminders, and online payment options, with integration capabilities with other Zoho products for complete business management.
• Provides invoicing, payment tracking, and automated payment reminders, with integration options for third-party apps to enhance functionality.

The future of accounts receivable management will likely involve advanced AI-driven solutions that streamline processes, enhance predictive analytics for accurate cash flow projections, and automate customer communication. Challenges such as increasing transaction volumes and evolving payment methods will drive the need for more adaptable and efficient systems, ensuring better debt recovery and reduced delinquencies. Hiring a partner can resolve these challenges and help businesses stay competitive by implementing accounts receivable management best practices. 

Invensis is a renowned and specialized accounting company that excels in delivering accounts receivable services to businesses across various industries. With a reputation built on expertise, innovation, and reliability, we have established ourselves as a trusted partner for organizations seeking comprehensive and tailored accounting solutions. Contact us today to revolutionize your accounting processes with our AI-powered solutions. Contact us today to know about accounts receivable management best practices and transform your accounting processes with our AI-powered solutions.

Frequently Asked Questions

1. How to effectively manage account receivables?

Businesses should implement clear credit policies, regularly monitor outstanding invoices, and promptly follow up on overdue accounts to effectively manage accounts receivables. They also need to utilize accounting software for accurate tracking, offer multiple payment options, and maintain strong communication with customers to ensure timely payments.

2. What are the best practices for optimizing the accounts receivable AR process?

It is essential for businesses to establish accounts receivable management best practices including, clear credit policies, use automated invoicing systems, regularly reconcile accounts, and implement robust follow-up procedures for optimizing AR processes. They should also offer multiple payment options, monitor aging reports, and maintain effective communication with customers to ensure timely payments.

3. What is the 10 rule for accounts receivable?

The 10 Rule for accounts receivable suggests that businesses should aim to collect at least 10% of their outstanding receivables each month. This practice helps maintain healthy cash flow, reduces the risk of bad debts, and ensures timely payments.

4. How to collect AR faster?

To collect accounts receivable (AR) faster, businesses should implement accounts receivable management best practices such as automated invoicing, offer early payment discounts, and maintain clear credit terms. It is also necessary to regularly follow up on overdue invoices, use efficient communication channels, and offer multiple payment methods to facilitate quicker payments.

5. What are the techniques of receivable management?

Receivable management techniques include setting clear credit policies, using automated invoicing systems, regularly monitoring aging reports, and offering early payment discounts. Additionally, maintaining effective communication with customers, implementing strict follow-up procedures, and providing multiple payment options can enhance collection efficiency.

Rick is a highly accomplished finance and accounting professional with over a decade of experience. Specializing in delivering exceptional value to businesses, Rick navigates the complexities of the financial realm easily. His expertise spans various industries, consistently providing accurate insights and recommendations to support informed decision-making. Rick simplifies complex financial concepts into actionable plans, fostering collaboration between finance and other departments. With a proven track record, Rick is a leading writer who brings clarity and directness to finance and accounting, helping businesses confidently achieve their goals.

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What is Accounts Receivable Management? Goals, Challenges, and Best Practices

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Key Takeaways

• Efficient accounts receivable management is critical for maintaining positive cash flow, customer relationships, and your business’s bottom line.
• Focus on customer relations, bank reconciliation, improved billing and invoicing, and resolving deductions to optimize your AR operations.
• Be aware of issues such as manual processes, data fragmentation, and lack of empirical data as they can hinder effective AR management.
• Optimize AR management by implementing clear internal processes, robust post-sales support, multiple payment options, and AR automation to streamline business operations.

Introduction

In the world of B2B commerce, credit is the lifeblood of business operations. Many customers routinely purchase goods or services on credit terms, creating a vital financial arrangement.

Once a supplier fulfills an order, the customer is obligated to settle the bill within a specified timeframe. This financial process is where accounts receivable management takes center stage.

Effective management of AR is not just important; it’s vital to ensure that invoices are sent out promptly and payments are received on time. However, its significance goes well beyond this.

Accounts receivable management has a ripple effect on your business, influencing customer relationships, cash flow, available capital, and ultimately, your bottom line.

This article will cover the AR management process, along with challenges, best practices, and strategies to optimize this critical financial process for your business.

What Is Accounts Receivable Management?

Accounts receivable management is the process of managing and monitoring the amounts owed to a company by its customers for goods or services sold on credit. It includes essential functions like invoice management, collecting payments, assessing credit risks, and resolving disputes.

Effective management of accounts receivable is an essential aspect of maintaining a positive cash flow for B2B businesses. It encompasses a range of tasks, including the initial onboarding of customers and evaluating their creditworthiness , as well as the subsequent issuance of invoices and the collection of payments. 

Furthermore, it involves the meticulous process of reconciling received payments with corresponding invoices and addressing any discrepancies or deductions raised by customers. This comprehensive approach ensures a smooth and efficient management of accounts receivable throughout the entire customer lifecycle.

Discover the Top 13 A/R KPIs Every Finance Exec Must Master in 2023 – Download Ebook

6 Objectives of Effective Accounts Receivable Management

To effectively address the evolving complexity of your AR processes, meticulous planning and strategic resource allocation are imperative. As your company experiences growth, the management of accounts receivables becomes increasingly challenging.

Here are the six accounts receivable fundamental goals that need your attention in optimizing your accounts receivable operations:

1. Credit workflow management

Effective credit policies necessitate periodic reviews, encompassing benchmarking, escalation procedures, and customer credit scoring , which can ultimately boost revenue.

Companies must adhere to federal and state regulations when extending credit, and it’s crucial to provide timely training to the credit approval team to keep them updated on these evolving requirements.

Implementing automation within this process not only reduces clerical errors but also serves as a safeguard against fraudulent activities.

Create or Enhance Your Credit Policy Document Effortlessly with Our Excel-Based Template – Download Now

2. Cash flow management

Collecting receivables promptly is vital for every business because the pace at which you can collect receivables from customers directly influences your cash flow .

When receivables slow down, it becomes challenging for your company to meet its ongoing business requirements.

3. Customer relations

How you handle your accounts receivables can significantly affect customer relations .

Continuously reaching out to a customer after they’ve already made a payment can lead to frustration.

Similarly, expecting payments from customers without sending invoices on time can also have a negative impact.

4. Bank reconciliation

Bank reconciliation involves managing various remittance formats, including addressing missing remittances. This task can be time-consuming and prone to errors if not organized properly.

Without an efficient system in place, your AR team can waste significant time sorting and applying payments.

5. Improved billing & invoicing

Streamlining invoicing processes can prevent billing errors and ensure invoices reach customers. Use tools that facilitate easy invoice sending and enable direct payments.

Providing various payment choices, like credit/debit cards or ACH drafts, enhances customer convenience. Online billing streamlines accounts receivable, accelerates invoice delivery, and enhances record-keeping.

6. Resolving deductions

In case of disputes, AR teams should explain each item to the customer and offer alternative solutions such as payment plans. Informing vendors about transaction terms before invoicing allows them to raise concerns beforehand. Having a procedure to resolve disputed invoices can lead to happier customers and more paid bills.

Common Challenges That Affect AR Management

Inefficient management of cash flow, inadequate customer support, and excessive focus on cash application can have a cascading impact on your team’s performance. This detrimental effect is particularly evident in the inability to meet payment obligations to suppliers, ultimately compromising the timely delivery of goods or services and potentially tarnishing your reputation.

So, let’s understand the common issues that affect accounts receivable management.

1. Misalignment between sales and finance goals

The disparity between the goals of the sales and finance departments can lead to conflicts. While the sales team aims to increase sales, the finance team focuses on reducing bad debt . This misalignment becomes evident when the sales team promises credit terms to customers that the finance department may not approve of.

2. Inefficiencies caused by Manual processes

Numerous gaps in the existing processes necessitate laborious manual efforts. Without automated accounts receivable processes , the team is forced to dedicate significant time and resources to manual tasks across all aspects. These inefficiencies ultimately result in poor accounts receivable management.

3. Impeded collaboration due to data fragmentation

The absence of a unified data system and information silos creates obstacles to effective collaboration. Without real-time access to centralized data, customer-facing teams such as sales, collections, and others struggle to collaborate efficiently. This fragmentation of data hinders their ability to work seamlessly towards common objectives.

4. Absence of empirical data for predicting negative outcomes

The lack of a mechanism for utilizing empirical data hinders the ability to forecast potential adverse consequences. Failure to document historical data makes it exceedingly difficult to anticipate when a customer’s financial situation may undergo a detrimental shift, potentially resulting in substantial losses if they become unable to fulfill their future payment obligations.

5. Disruption in continuity stemming from internal and external Team changes

Efficient management of credit transactions requires consistent documentation, particularly in terms of invoicing and payment flows. Inadequate streamlining of the accounts receivable processes can lead to disruptions and gaps within the AR workflow, hindering the smooth continuity of operations.

7 Effective Accounts Receivable Management Techniques

There are many components to accounts receivable management – to manage the process effectively it’s crucial to handle components such as credit risk evaluation, invoicing, collection, reconciliation, and dispute resolution efficiently.

Here are seven effective accounts receivable management techniques that address these individual components and often overlap to ensure comprehensive management. Let’s dig in.

1. Clear internal processes

Often the root cause of your collections and cash flow issues is simply a matter of poor internal processes. One of the easiest ways to mitigate the constant issues is to make sure that each of the teams understands the end objective of the other. 

Sales should focus on getting orders and the finance team should ensure that the customer is financially sound enough to warrant credit terms. However, it is equally critical for each team to support the other in these processes.

2. Two-way communication

Establishing effective two-way communication is vital, both internally and externally. This may seem like an obvious factor, but it is often ignored, especially when it comes to the finance team and customers. Enable easy-to-use and numerous options for stakeholders—both internal and external to interact in the way they choose to.

3. Robust post-sales setup

Many collection issues stem from customer dissatisfaction with post-sales support. This tip applies to all customer-facing teams. As a member of the finance team, you should ensure that all sales-related documentation reaches the customers timely.

Additionally, you can streamline the invoicing process with meticulous attention to detail.

4. Timing and tone

In invoicing, two crucial aspects must be perfected. First, ensure that invoices are sent out promptly and in line with agreed payment terms.

Establishing a consistent invoice delivery schedule prompts customers to anticipate and prepare for on-time payments.

Secondly, pay attention to the tone of your communication when sending invoices. Maintain a clear, concise, and polite approach in both the invoice content and accompanying email communication.

Avoid clutter and ensure all necessary details are included for a smooth payment process.

5. More payment options

When it comes to facilitating payments, providing multiple options is paramount. This approach ensures that customers can make payments even when their authorized personnel are unavailable due to travel or other commitments.

By offering a range of payment options, you enhance convenience for your customers, eliminating the need for them to disrupt their daily routines to fulfill payment obligations.

6. Quality all the way

In B2B transactions, particularly those involving deferred payments, maintaining high-quality standards is essential. Quality should encompass not only the products or services you provide but also the quality of customer interactions at every stage of engagement.

Ensure that a commitment to quality permeates every aspect of your operations, from production and logistics to inventory management and your finance department.

7. AR automation

Digital transformation has become increasingly valuable for businesses globally, particularly in the realm of critical finance processes. A specific area that stands to gain significant benefits from automation is accounts receivable. By implementing automation in this area, businesses can experience a notable increase in efficiency, as well as a reduction in manual errors. 

The advantages of accounts receivable automation extend beyond simply streamlining the process; it also enables organizations to effectively monitor invoicing, collections, and emerging patterns. Furthermore, this automation empowers employees to redirect their attention towards more strategic endeavors, ultimately fostering business growth and success.

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HighRadius offers a range of AI-powered solutions that cater to companies of all sizes across various industries. Our RadiusOne AR Suite is specifically designed for mid-market CFOs, providing a comprehensive suite of features such as collections, cash reconciliation, credit management, and e-invoicing applications. Leveraging the power of Artificial Intelligence, all these solutions seamlessly integrate with one another, offering your company a centralized system to efficiently manage and monitor all accounts receivable processes from a single platform.

Our advanced AR analytics and reports offer extensive customization options, allowing businesses to gain valuable insights into customer behavior. This enables proactive issue anticipation and resolution, preventing potential escalations.

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FAQs on Accounts Receivable Management

1. what is the primary goal of accounts receivable management.

The primary goal of accounts receivable management is to ensure the timely collection of payments owed by customers for goods or services provided on credit.

2. What is the most important aspect of managing accounts receivable?

The most important aspect of managing accounts receivable is maintaining a positive cash flow by promptly collecting payments from customers. Additionally, effective communication and strong customer relations are crucial for a smooth and efficient accounts receivable process.

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Credit Control for Accounts Receivable Management: A Case Study of a Pharmaceutical Company

• First Online: 29 May 2022

Cite this chapter

• Abdulla Abdulmajid Alkhaja 4 ,
• Ahmad Obaid Almheiri 4 ,
• Obaid Meshal Almansoori 4 ,
• Omar Abdulaziz Alabdulla 4 ,
• Saeed Ali Almarri 4 ,
• Randa Elchaar 4 &
• Rihab Grassa 4  

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Account receivables management is a fundamental aspect in evaluating a firm’s efficiency in regards with cash flow and credit turnovers. The purpose of this paper is to assess the credit control and receivable management efficiency for one of the largest pharmaceutical company operating in the world. Our paper findings show that pharma companies should implement stringent credit control measures that can help in improving their cash flow. As well as, company in this industry should form strategic alliances that help in sharing credit information and implementing credit control measures.

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The impact of cash flow management versus accruals management on credit rating performance and usage

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Alkhaja, A.A. et al. (2022). Credit Control for Accounts Receivable Management: A Case Study of a Pharmaceutical Company. In: Echchabi, A., Grassa, R., Sibanda, W. (eds) Contemporary Research in Accounting and Finance. Palgrave Macmillan, Singapore. https://doi.org/10.1007/978-981-16-8267-4_5

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Accounts Receivable Management: What It Is & How to Improve It

• Parag Patel

Accounts receivable management involves tracking and securing customer payments after orders have been placed. Much more involved than cashing a check or ticking a “paid” box, A/R management directly impacts your business’s cash flow and liquidity and, ultimately, your organization’s bottom line. 

Read to learn about common accounts receivable management processes, challenges, best practices, and more.

Streamline your A/R management with automated A/R software

Talk to an accounts receivable expert., why does accounts receivable management matter.

At its core, accounts receivable management ensures that an organization promptly receives payments for goods and services. By tracking outstanding invoices, promptly addressing late payments, and nurturing customer and vendor relationships, businesses with effective A/R management can more efficiently cover operational costs, invest in growth opportunities, optimize their cash flow, and weather unforeseen financial challenges. 

Conversely, a business without a well-organized accounts receivable management system risks encountering cash flow gaps, hindered ability to meet immediate financial obligations, missed growth prospects, and, in extreme cases, bankruptcy.

Accounts receivable management is also a critical component of customer relationship management. Timely and accurate billing and professional communication regarding payments build trust and confidence in business-client relationships.

Effective accounts receivable management is not just about financial prudence; it’s a strategic approach that safeguards a company’s financial health while fostering positive customer experiences, laying the foundation for sustained business growth .

Accounts receivable management processes

Though the exact process may vary from one business to another, every organization’s accounts receivable process revolves around billing — when customers are sent invoices to notify them of outstanding bills — and payment collection — when those invoices are reconciled. The actual step-by-step accounts receivable management process goes something like this: 

• Payment processing : Upon receipt, the company processes the payment using the chosen method, verifying the transaction’s authenticity and accuracy. The received payment is accurately matched with the corresponding invoice (via cash application and other methods), updating the company’s records and customer balances in real-time.

While the above outlines the general payment management process, another important (and ongoing) aspect of A/R management is the reporting and monitoring of a company’s current state of finances.

Companies either choose to outsource these accounts receivable responsibilities or opt to do them internally. Here, A/R managers closely monitor metrics such as the average collection period, customer payment trends, outstanding receivables, and aging reports.

By regularly gauging their financial standing, companies can gain valuable insights into their cash flow, identify potential issues or bottlenecks in the A/R process, and make informed decisions to optimize their financial stability and overall business operations.

Supercharge A/R for QuickBooks Desktop

Preparing and issuing estimates and invoices, setting up workflows, and more., common accounts receivable management challenges and complications.

Business growth signals that a company’s cash flow and financial standing are at peak health, but this is when receivables management becomes more crucial than ever. An influx of customers means companies must scale their management practices to accommodate more inquiries and invoices. But if the company’s current A/R management system isn’t as strong as it should be, those cracks can spread and cause financial issues. Here are some common challenges businesses face as a result:

• Invoice errors: When companies send out invoices late or there are data inconsistencies, these errors can lead to delays in payment processing, customer disputes, and ultimately, frustration for both the business and its clients.
• Late payments: Late payments can severely affect a company’s cash flow and financial planning, often stalling its ability to replenish and maintain available resources and offset operational costs.
• Missed reminders: Companies that aren’t using accounts receivable automation tools to help remind customers of late payments risk further delaying collections and overlooking invoices.
• Writing off unpaid invoices as bad debt: Sometimes, businesses face the unfortunate reality of writing off unpaid invoices as bad debt, which can have a significant negative financial impact.
• Allocating payments incorrectly: Mixing up invoices or asking for an incorrect payment amount can lead to confusion and dissatisfaction among customers and erode their trust in a business.
• Poor customer experience: A negative customer experience in the accounts receivable process can damage client relationships and affect future business opportunities.
• Limited employee time: Even with a strong accounts receivable management system, not having enough employees to monitor it can lead to unaddressed customer inquiries, a higher risk of human error, and missed invoices.

Businesses that take the time to invest in, strengthen, and streamline their accounts receivable processes position themselves for long-term financial success.

Best practices to improve your accounts receivable management

These best practices take the guesswork out of A/R management and can help your business reduce the risk of encountering the common challenges mentioned above.

1. Set standards for acceptable credit 

Establishing clear standards upfront for extending credit sets the foundation for financial certainty and better business planning. This involves thoroughly evaluating a customer’s creditworthiness, outlining credit limits to mitigate the risk of excessive outstanding balances, and defining credit terms and payment schedules. 

2. Be clear about your payment requirements and deadlines

Timely payments aren’t possible without clear payment deadlines. When communicating payment requirements, specify payment interval terms, such as “net 30” or “due upon receipt,” to clarify when payments are expected. Also, provide information on accepted payment methods, including online payment options and bank transfer protocols. For added assurance, implementing automated systems to send payment reminders as due dates approach can help minimize oversight and overdue payments.

3. Make it easier to pay you

Simplifying the payment process encourages prompt payments and reduces friction for customers. The best way to do this is by providing online payment portals where customers can submit payments electronically. Offering various payment methods, such as credit cards, electronic funds transfers (EFT), and mobile payment apps, helps cater to diverse preferences and makes the payment process more convenient. On the business side, consider implementing automation to process payments efficiently and reduce the need for manual data entry that can lead to errors.

4. Know how to measure accounts receivable management performance with appropriate KPIs

Effective accounts receivable analysis relies on key performance indicators (KPIs) that can give you a glimpse into how healthy your business cash flow is. Collect and review data for the following A/R KPIs :

• Days sales outstanding (DSO): Calculate DSO to assess the average time collecting payments after a sale. A low DSO indicates efficient collections , reflecting a shorter cash conversion cycle.
• Average days delinquent (ADD): ADD measures the time payments are overdue. A decreasing ADD suggests that customers pay closer to their due dates, while a higher ADD translates to consistent payment delays.
• Accounts receivable turnover ratio: This ratio quantifies how quickly outstanding accounts are collected during a specific period. A higher ratio indicates that a company is collecting outstanding payments efficiently, whereas a lower ratio signals a need for improvement.
• Collection Effectiveness Index (CEI): The CEI compares the reduction in outstanding receivables over a specified time frame to the actual cash collected. A higher CEI indicates that a company successfully converts outstanding invoices into cash, while a lower CEI suggests improvement in collections efforts.

5. Be proactive and accurate with collections

Consider employing automated reminders and notifications to prompt customers to pay on time. Automation software can handle this for you, freeing up time and energy for your A/R management teams to focus on more complex tasks. Use a solution that automates matching payments with corresponding invoices to mitigate disputes and facilitate accurate accounting.

6. Improve communication and the understanding of your A/R with analytics reporting

Moving your accounting system online gives you access to real-time data and analytics, enabling better decision-making and forecasting. Plus, online platforms support communication among internal teams and with customers, allowing instant access to reports and data to streamline collaboration and troubleshooting.

See how much your business can save with A/R automation

From billing and collection to cash application and reconciliation and more., all of the best practices for accounts receivable management can be facilitated with automation.

Why go through the burden of manually writing invoices, distributing them, and collecting payments when automation tools can do all this for you? Manual processes can be impossible to achieve on time for businesses with a large customer base, but there is a solution. Here are ways businesses can benefit from using automation to manage accounts receivable:

• Enhanced compliance: Automated systems help maintain data security and adhere to industry regulations and compliance standards, reducing compliance-related risks.

By embracing automation, companies can fine-tune their financial operations and weather economic fluctuations that could otherwise set them back.

Invoiced: Automated accounts receivable management capabilities

Financial transactions are relatively simple: a customer obtains a good or service in exchange for monetary compensation. But when the customer doesn’t fulfill their part of the deal or takes a while, the business suffers, and things can get complicated. This is why implementing A/R management best practices and leveraging automation tools can mean the difference between business growth and growing debt.

Automated invoicing and collections, real-time analytics, accounting platform integration — Invoiced’s Accounts Receivable Software optimizes invoice-to-cash lifecycles for easier payment collection and management. With our open API, you can customize our solution to fit your business framework and integrate seamlessly with existing platforms.

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The Definitive Guide to Receivable Management

Cash flow is the blood line for any business. Business can survive lack of profits, but cannot survive lack of Cash flow. Managing receivables is one of the most important parts of any Small or large businesses. Hence it is important to know about receivable management solutions.

When we start the business, the thing that looks most difficult is Sales. But once we have done Sales, then we are revealed to more difficult part – Receivables. Yes, collecting the due payment from our Buyers is a bigger task, sometimes than the Sales itself.

If working capital is lifeline of the Business, then Managing the Accounts receivables is soul of working Capital. Tweet

What does Receivable Management Mean?

Put simply, Receivable Management or Managing Accounts Receivables means collecting the payments due for Sales in a timely manner.  When we sell any services, products or solutions to our clients or customers, they owe us the money. Collecting that money is called Receivables Management.

In Accounting terms Our Customers who owe us money are called as “Sundry Debtors”. Yes, they are called Debtors, because they owe us money.

In India, Management of Receivables is also known as:

• Payment Collection.
• Collection Management.
• Accounts Receivables.

In a survey, 90% of the respondents agreed that collecting Sales Receivables is bigger challenge than Sales itself. Tweet

What is receivable management?

There are very few businesses, which have the luxury of receiving money before selling, i.e. Selling for advance payments. Most of the Companies sell their offerings on a credit. Which means that they will collect the money after selling.

Although it looks very simple on the face of it, Managing receivables from Debtors can be a very complex task depending on the nature of our business. As our business grows and as our offering gets complex the process of collecting the payments needs to be designed accordingly.

So the entire process of defining the Credit Policy, Setting Payment Terms, Payment Follow ups and finally timely collection of the due payments can be defined as Receivables Management.

Many people might be able to sell, But only few know how to recover money. Tweet

Objectives of Receivable Management

In order to keep business running, we need cash. The whole purpose or objective of Receivables Management is to keep inflow of cash healthy.

In other words, these are the objectives of Payment Collection.

• Collect receivables from our sundry debtors.
• Maintain a healthy cash flow for the company, so that it can pay our creditors.
• Have proper Policy for Credit management.
• A working process and mechanism for managing payment follow ups and timely collection.

Obtain a Free Demo of Receivable Management Solution

To know more how a Receivable Management Solution can improve your collection of outstanding Book a Free Demo

Its Importance

Why Receivables management is so important?

• Cash flow is always considered as bloodline of any business organisation. Badly managed Receivables can break the company.
• Most of the companies that go bankrupt have Cash flow problems. Companies with lack of profit can survive, but lack of cash flow is fatal.
• Working Capital is one the most costliest form of capital. One of the ways of calculating working capital requirement can be defined as the difference between Sales and Receivables. Bad collections can mean higher working capital requirements. Which means higher interest costs for the company.
• A reliable and predictable Receivables will ensure steady cash flow management of the organisation. Amounts receivables with no due dates are useless.

Benefits of Accounts Receivable Management

• All our Budgets and projections depends on how much we can spend. Predictable cash flow enables us to manage our operations and expansion plans.
• Effective receivables management ensures that our Working Capital requirements are kept at minimum.
• Working capital is also fixed capital, which attracts interest. Lower Debtors will reduce our Interest burden.
• When we are buying any goods or services, we can bargain mainly  on quantity or Payment terms. Having a good receivable management provides us with enough cash flow to bargain effectively with our Suppliers.
• In case of thin margins, just imagine how much more sales we have to do to recover and adjust just one small bad-debt. Non receipt or delayed receipt is the biggest profit leakage any company can have.

Planning for a Good system

• Having a well defined clear terms of Payments is half the battle won. We might need to have different payment terms based on what we are selling, or quantity or pricing.
• Payment terms should be set right into the Invoice that we send and even the PO that we receive from the customer.
• Having a down payment (or advance payment) is the best option. Most of the time, we have mythical fear that we will lose the customer if we ask for advance payment.
• How much credit is to be given and to whom and for how long. Every customer might be thinking that they are different. We need to have a proper Credit Policy to cover every kind of Customer.
• Who will follow up and collect the payment? There should be very clear cut policy regarding this. Otherwise, its an ever lasting buck passing exercise and ultimately the company has to suffer.
• In most of the SME cases, assigning the receivables responsibilities to Sales team is a good idea.
• Having a Credit Policy with no Credit Check in place is absolutely wasteful. Apart from financial documents and Bank details., nowadays there are many credit rating agencies, which provide online Data about the Credit ratings of any particular client.
• It’s always a very good idea to do a market research of the customer before providing them with the credit. If the customer is an existing one then just analysing past history will tell us lot of actionable information.
• There should be a clear policy regarding When to  engage legal team for Debt collection
• With many online banking and other options, Now the banking has improved a lot. We should provide as many options to our Customers to make payment, like Bank, Cash, Credit Card, Electronic Funds transfer, Bill discounting, Bill Purchase etc.
• Firstly, the Technology can be used in Credit Check Process, as discussed above.
• More importantly, deploying a software solution, which makes entire Receivable Management process a lot more easier, with automations and reporting.
• While determining any Receivable management solution, make sure that it has Mobile Application.
• There should be realtime dashboard reporting that we need for smooth operations.
• The Customer who go bad, generally don’t go bad overnight. They actually shows a lot of signs of bad debts, before they go bad. But to catch those signals, we need to have proper ageing analysis and monitoring of Receivables.
• Also, there should be clear policy for the next actions. What should the team do, when the Customer does not pay after the bills are overdue?
• Do we have legal team and process in place which is competent enough to take legal actions?
• This is very common, for BFSI segment, but not for other businesses.  There are debt collection agencies, who have specialised processes and capabilities to make the entire process of Receivables as smooth as possible.
• But this is not a bad idea, as this will enable us to focus more on the other functionality of the business like Marketing, Sales and innovation.

Importance of Credit Policy in Receivables Management

Having a well defined credit policy is the first step in having an effective Accounts Receivables Management System. How do we define Credit policy depends on various factors. Some of the points for Credit Policy are listed below:

• Market practice. In the beginning it is important to follow well established policies in the market.
• Credit Policy as USP. Many Companies choose to provide more lenient credit policy, much better than market to get more business.
• Onboarding a new customer should have a strict emphasis on the credit check.
• There should be proper process and policy on when to stop billing to defaulting customers.

Receivable management solutions

Deploying software for managing receivables is a very good alternative. A good Receivable Management solution should have the following features or capabilities.

• Mobile App.
• Real time information.
• Messages templates for followup
• Store all contracts and related documents in one place.
• Monitoring Due and overdue Receivables.
• Automated Reminders
• Rule based Escalations
• Projected Day wise receivables.
• Projected Sales Person wise (or person responsible for collection) receivables.
• Area wise or any other criteria for analysis.

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MANAGEMENT OF ACCOUNTS RECEIVABLES AND ITS EFFECT ON FIRM'S PERFORMANCE: A CASE STUDY OF KOSEL LOGISTICS.

ABSTRACT Accounts receivables refer to a legally enforceable claim for payment from a business by a company for services rendered or for goods supplied to the business. According to Kakuru (2000), when a company renders a service or sells its goods and does not receive cash for it, the company is said to have granted trade credit to clients. The general objective of the study was to identify the effect of management of accounts receivables on the performance of KOSEL Logistics. The study adopted a descriptive cross-sectional survey in which questionnaires were given to a selected sample of respondents from a target population of the management, staff and the customers of KOSEL. Purposive sampling was used to select ten (10) management staff and simple random sampling was used to select forty (40) employees. Also, simple random sampling was adopted in selecting thirty (50) customers of KOSEL. The data collected was processed using SPSS. The results of the study revealed that majority of the customers ask for credit from KOSEL and they do not need to present any collateral to qualify for a credit. Majority of the customers of KOSEL said they have defaulted in the payment of their credit obligations. The findings of the study also shows that KOSEL does not undertake formal credit investigation before granting credit to their customers and customers’ bank reference are not checked. The study revealed that discount payment for early payment of debt increases revenue. The findings of the study revealed that the efficient management of accounts receivable increases sales, reduces cost associated with bad debt, and also increases the profitability of the company. The failure of customers to pay back their credit was found to affect profitability. It was also observed that KOSEL usually faces liquidity problems. The study recommended that KOSEL must have a receivables management policy that will assist in selecting customers for credits since this can help in the selection of customers who will be able to pay their credit on time.

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Accounts receivable management directly impacts the profitability of a company. Firstly, the purpose of the empirical part of the study is to analyze accounts receivable and to demonstrate a correlation between the accounts receivable level and profitability expressed in terms of Retun on Assets (ROA) of sample companies. Secondly, the aim of theoretical research is to explore cost and benefits of changes in credit policy, determine the independent variables which have an impact on net savings and establish a relationship among them in order to develop a new mathematical model for calculating net savings following a revision of credit policy. On the basis of research result, a mathematical model for calculating net savings and following a revision of credit policy, has been developed and with this model a company can consider different credit policies as well as changes in credit policy in order to improve its income and profitability and establish a credit policy that results in the greatest net profitability.

International Journal of Academics & Research, IJARKE Journals

This study sought to establish the effect of credit management on financial performance of firms transport firms in Mombasa County. The study‟s objective was to determine the effects of credit management on financial performance of transport firms in Mombasa County. The study targeted 220 staff of transport firms in Mombasa County and the sample size was 140. Data collection was both primary and secondary. Both descriptive and inferential statistics were analyzed for the variables under the study. The study concluded that credit risk control, credit policy, account receivables and credit term have significant effects on financial performance of transport firms in Mombasa County. The study recommended that That transport firms should put in place a robust credit risk control mechanism to safeguard the interest of the company first; That transport firms should be reviewing from time to time its credit policy to be in line with international acceptable standards; That accounts receivables should be well managed, and its audit reports and suggestions implemented; That credit terms should be varied from client to client to increase sales volumes.

Habib Ahmad

A research conduct on topic "IMPACT OF WORKING CAPITAL MANAGEMENT ON PROFITABILITY OF THE FOOD AND PERSONAL CARE PRODUCTS SECTOR IN PAKISTAN" From above stated purpose, succeeding exact research questions were framed to investigate: 1: “What factors affect a performance of firm’s working capital management?” 2: “How efficiently a firm converting its working capital into ready money?” 3: “How company value enhances through efficient working capital management?” Scope of Study: The scope of study considers the selected Food and Personal care products companies listed in Karachi Stock Exchange of Pakistan. Four companies are selected for the study purpose as random sampling. The selected companies are: 1) Unilever Pakistan Ltd. 2) Nestle Pakistan Ltd. 3) Mitchell’s Foods Farm Pakistan. 4) National Foods Pakistan Ltd. The scope of this study includes the relationship b/w independent variables & dependent variable. Independent Variables are: 1) Average collection Receivable Period. 2) Average Inventory Conversion Period. 3) Average Payment Period. 4) Cash Conversion Cycle. While dependent variable is 1) Return on Asset

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• DOI: 10.15373/2249555X/JAN2014/33
• Corpus ID: 167750882

Receivable Management: A case study of Indian Pharmaceutical Industry

• Ashish Mohanty , L. Pani , Sukhamaya Swain
• Published 1 October 2011
• Business, Medicine
• Indian journal of applied research

One Citation

Pharmaceutical industry in india : a brief report during 2001-2010 mr ., one reference, related papers.

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More From Forbes

How tax receivable agreements are created and why they matter.

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Andy Lee is the founder and chief investment officer at Parallaxes Capital .

Tax is the largest asset class that most have never heard of . As the adage goes, there are only two things that are inevitable in life: Death and taxes. We thankfully only focus on the latter, and tax as an asset class is a nascent industry with massive potential scale. Tax receivable agreements (TRAs) are one of the lesser-known but promising avenues to access the growing opportunity set.

Though TRAs have been around since the 1990s (over 30 years ago!), they are frequently still overlooked and misunderstood. My team and I are accustomed to answering questions about the ins and outs of TRAs, and the three most common queries are: 1. What is a TRA? 2. How are TRAs created? 3. Why are they important?

Let’s dig into the answers to all three questions here.

1. What Is A TRA?

A tax receivable agreement is a contract, typically between a public company and its pre-IPO shareholders. The TRA stipulates that the company must share a portion of its cash tax savings with these pre-IPO shareholders.

The result is that the company’s early shareholders will now have an annual stream of cash flows from the TRA, like an annuity. Similar to pharmaceutical or music royalties, TRA payment streams are long-dated and cash-yielding, which can be appealing for investors with a long-term focus.

2. How Are TRAs Created?

Let’s say a company is getting ready for an IPO. Prior to going public, if the company was structured as a pass-through entity—such as a limited liability company or a partnership—then the company may need to convert to a C Corporation to be publicly traded.

Pass-through entities also have the option to pursue an IPO through what's called an Up-C IPO structure . Through this structure, pre-IPO owners typically create sizable tax assets associated with a step-up in basis for their stake in the company before going public. Since these tax assets are created as part of the company going public, the pre-IPO shareholders should receive some level of value for these assets.

However, public market investors often don’t ascribe much, if any value, to tax assets, largely because many public market investors value companies based on a multiple of revenue or Ebitda, not free cash flow (which is impacted by cash taxes). If a company has a tax asset, then it can utilize that tax asset to reduce its cash taxes, which will improve its free cash flow.

Due to the complexity of valuing tax assets and public market investors focusing on valuation multiples based on revenue or Ebitda, the value of tax assets that pre-IPO owners are delivering to public market investors is often not reflected in public equity valuations. As a result, pre-IPO owners will believe they are not receiving adequate value from the tax assets they are creating. Why is that? It’s primarily driven by the evolution of the market here in the United States.

As a country, we’ve gravitated away from being active investors to using a passive asset management approach. Many passive managers (i.e., ETFs or mutual funds) have a mandate to invest based on inflows and outflows from their fund vehicle complexes, agnostic of valuation. Long or short hedge funds, major sources of active management, are viewed by many to be short-term investments, focused on quarterly metrics, versus long-term oriented. They are therefore not focused on taxes, as they are unlikely to move stock prices. This is where the tax receivable agreement comes in. Investors can put a TRA in place to monetize the tax assets—without having to rely on public market investors to assign appropriate value to them.

3. Why Are TRAs Important?

Since tax assets are often unnoticed or undervalued in public markets, a TRA can help pre-IPO owners ensure that they receive fair compensation for their tax assets once the company goes public. TRAs can also serve as a valuable tool to not only bridge gaps in valuations when a company is taken public but also to drive social and governance benefits by increasing transparency with stakeholders. Cash flows from the TRA provide pre-IPO shareholders an additional form of consideration that can help resolve a disconnect between the valuation pre-IPO shareholders want to receive and the factors public market investors consider when valuing a company.

I believe that, as an investable asset class, tax receivable agreements offer three key and distinct advantages compared to other alternative credit strategies:

1. Uncorrelated Returns : TRAs provide returns that have low correlation relative to traditional public equity and debt investments, so the cash flows of TRAs are insulated from the volatility of public markets.

2. Cash-Yielding Nature : The cash flows from TRAs present an annuity-like stream, delivering a reliable source of income.

3. Call Optionality On Potentially Higher Corporate Tax Rates : Unlike most investments, the returns of TRAs have a direct positive relationship with corporate tax rates. In other words, TRA returns (on a pre-tax basis) increase when corporate tax rates increase. Holding everything else constant, an increase in the federal corporate tax rate would increase a company’s payment obligations under its TRA.

As an emerging asset class, tax represents a massive opportunity set with plenty of whitespace for innovation. The TRA is just one overlooked niche segment of tax as an asset class. Over time, I believe TRAs will become as mainstream as other once esoteric asset classes such as music and pharmaceutical royalties.

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How Camuzzi Gas Distributor Saved Over 1,000 Hours a Year in Asset Management with InvGate Insight

Camuzzi is the largest natural gas distributor in Argentina in terms of volume, infrastructure magnitude, and geographical coverage. The company serves over 2,000,000 households across 45% of the national territory.

With over 30 years as the leading distributor in the industry, Camuzzi faced significant challenges in managing its IT infrastructure during the company's transition to a hybrid work model.

In this context, InvGate Insight provided a series of advanced functionalities that were key to addressing the issues faced in IT Asset Management .

Let's take a look at this process with some precise numbers.

Challenges Faced by Camuzzi

Before migrating to InvGate Insight, Camuzzi used an internally developed tool that had significant limitations in facilitating the growth and sophistication of IT support provided to its teams.

This complexity was represented by over 3,000 technological assets and 1,700 employees spread across 16 business units.

Some of the inefficiencies of the previous tool included manually tracking and administering their IT assets and limited capabilities to generate accurate reports on their status and location.

Additionally, in a company with a vast geographical dispersion, each local team was responsible for manually updating the status of their assets, resulting in fragmented information and a lack of a single reliable source of information.

This prevented the company, among other issues, from planning and executing technological updates effectively to meet business demands.

Migration to InvGate Insight

In this context, at the beginning of 2023, Camuzzi began working with ThinkHub to implement InvGate Insight as their Asset Management tool .

The migration process was completed in two months, including configuration and review, and involved managing 3000 IT assets, such as workstations, laptops, and mobile phones.

Some of the key advanced functionalities that InvGate Insight provided to solve Camuzzi's problems were:

• Continuous reporting agent : Offering real-time data on the status of software, hardware, users, and the overall health of equipment, eliminating the need for constant manual supervision.
• Real-time discovery : Providing an updated and comprehensive view of all devices on the network, improving Resource and Security Management.

Keys to Camuzzi's Success with InvGate Insight

With the implementation of InvGate Insight and this combination of advanced Asset Management capabilities, Camuzzi streamlined processes and scaled the implementation of best practices across the company.

The keys to success were access to an accurate and updated view of the entire IT infrastructure (eliminating previous information fragmentation), the implementation of automations that reduced time and human errors, and the introduction of reliable metrics for informed decision-making.

An example of this is that InvGate Insight allowed Camuzzi to quickly identify devices with outdated operating systems. This visibility was essential to developing and implementing an update plan, ensuring compliance with security and compliance standards.

It is also important to highlight the outstanding support provided by ThinkHub, which maintained constant follow-up after the implementation, offering technical support and advice to optimize the use of the tool and solve any problems that might arise.

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Milton Ranch Restoration: A Case Study for Successful Collaboration 

There are many benefits that come from the restoration of prairie systems. And collaboration is key to making it happen. 

Growing up, Bill Milton split his time between the Bay Area and his father’s ranch near Helena, Montana. After his father passed away, he wandered around for a time, before returning to Montana. In 1978, Bill and his wife Dana bought a ranch, now known as Milton Ranch, just north of Roundup, Montana. The Milton’s made a home on the ranch where they raised their three children. 

Milton Ranch is 15,000 acres, and sits within the largest intact grassland ecosystem in the world. The grasslands are home to antelope, deer, elk, and prairie dogs. Many birds visit the ranch as well, including ducks and geese, white pelicans and cormorants, and bird species of concern like the Sprague’s pipit. While some of the land was previously farmed, a majority of those fields have since been returned to native grasses, and the Milton’s continue to do the same to the remaining non-native fields. Over 400 cow-calf pairs graze on the grasses. About two thirds of the Milton ranch is deeded land, and the remaining third is leased from the Bureau of Land Management (BLM) and the State of Montana.  

When asked about his favorite time to be on the land, Bill Milton shared, “All the time. I love early mornings, and all the different lights at different times of the day. When you work on land, there is an interdependence going on. Over the years you see how the grasses and animals change. When you are here for a long time, you pick up on those differences and see subtleties that someone who just showed up wouldn't notice.”  

The Milton’s take a holistic approach to land management, recognizing the positive relationship that is possible between cows and the landscape they live on. This holistic approach involves moving the cows frequently, often daily, to provide short but intense grazing periods to the cows and long recovery periods to the grasslands.  

Close to ten miles of ephemeral stream runs through the center of Milton Ranch. The creek is an unnamed tributary of Willow Creek, and a part of the Musselshell Watershed. The Milton’s understand that rivers do not stop at fence lines or jurisdictional boundaries, and that land management shouldn’t either. To better steward their ranch, the Milton family is teaming up with the BLM,  National Wildlife Federation (NWF), and Anabranch Solutions , a small riverscape restoration business, to carry out restoration on the creek.  

Due to the holistic management techniques already in practice on the ranch, the riparian areas are in fairly good shape. To help maintain the health of the riparian areas, they are not grazed during peak growing season more than once every four years. That gives riparian vegetation three out of every four years to build root mass and take advantage of available moisture. However, there is still an opportunity to improve the health of these riparian areas. As central Montana becomes more arid, conserving water resources is an important part of maintaining resilience. 

Shelby Weigand, senior coordinator for riparian connectivity at NWF said “although Milton Ranch experienced intense grazing and stream modification in the past, due to improved grazing practices, it is on an upward trend. We want to continue that upward movement.”  

To help maintain water resources and increase resilience, partners are working to restore the creek on Milton Ranch. The goal of the restoration project is to connect the floodplain, maintain flows in the creek later into the year, and improve native vegetation along the creek. The project will involve installing beaver dam analogs, and post-assisted log structures, which cause water to slow down and spread out. Partners will also plant woody vegetation such as buffaloberry, chokecherry, and willow, that will be fenced in so the plants can be used as seed or rhizome banks. 

While some of the work will happen on Milton Ranch, it will also improve the creek on BLM and State of Montana owned land. Shane Trautner, rangeland management specialist for the BLM field office in Billings, has worked on previous stewardship projects with the Miltons, and he is pleased to be partnering with them again. Trautner was tasked with collecting woody material to use for the structures. He is collaborating with BLM’s hazardous fuels crews to get woody material from thinning projects in the area. Some of the material will come from the Milton Ranch, and the remainder will be sourced twenty miles west of the site. Materials will be collected and staged close to the date of implementation, so they are malleable and easy to build with.  

During project implementation, NWF will be hosting a workshop to discuss the benefits of restoration in prairie systems. Weigand and Trautner hope that while the Milton Ranch may be the starting point for restoration in the Musselshell Watershed, it can also be a catalyst for future projects.  

“This is about more than just Bill’s place,” said Trautner. “Ultimately the goal is to expand and use collective resources to keep building and fine tuning from here. I want to document real change in the watershed.” 

Bill Milton agrees, noting that “these restoration projects are good for everybody. It is good for ranchers to have partnerships and organizations to tell a good story to increase appreciation for ranching and how it can be beneficial for landscapes. Collaboration is our superpower.”  

About the Author 

Rose Vejvoda is a graduate student at Northern Arizona University, where she is a candidate for a Professional Master of Science in Climate Science and Solutions, and a graduate certificate in Greenhouse Gas Accounting. Rose received her undergraduate degree from Montana State University where she studied English Writing, and Sustainability Studies. She has a passion for using effective storytelling to build relationships, uplift local communities, and help people feel connected to the natural world. Rose wrote this story while she was a Freshwater Ecosystems Intern at Natural Resources Defense Council working with BLM.  

Rose Vejvoda, Intern

Montana/Dakotas State Office

5001 Southgate Drive Billings , MT 59101 United States

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A bi-objective model for the multi-period inventory-based reverse logistics network: a case study from an automobile component distribution network.

1. Introduction

• To optimize the transportation system in the ISACO company.
• To cut down transportation costs.
• To increase customer satisfaction by increasing the supply of customer demands.
• To allow the customers to return unused parts (which are not used by customers due to seasonal variations or environmental changes and market fluctuations.
• To collect and dispose or recycle the stock parts.

2. Literature Review

2.1. a review of the literature on distribution systems in supply chain management, 2.2. a review of the literature on green logistics in supply chain management, 3. materials and methods.

• Very high transportation costs induced by long round-trip distances.
• High costs imposed on the company as a result of vehicle breakdown.
• Frequent troubles related to timely goods delivery (e.g., the cities located far from Tehran, the chances are high that the goods do not reach on time).
• To benefit from the full capacity of cars, it is required that the amount of the ordered goods reach a certain quantity and then the goods be delivered to the representatives, which leads to dissatisfaction among the representatives and losing the competitive market.
• The lack of order and prioritization in the current system.
• Not considering different scenarios in decision making.
• Not being able to return unused or low-use parts by the representatives.
• The lack of an integrated system for receiving scrap parts.
• Not able to implement strategic planning.
• Some of the expected merits of the new system are the following:
• Reducing the costs resulting from redundant transportation.
• Increasing the representatives’ satisfaction level due to goods’ timely delivery and increasing the power to supply the demanded goods and the possibility of returning low-use parts to the representative.
• Systematizing transportation system which curbs other nuisances.
• Increasing the flexibility of the system.
• Decreasing the risks such as the sensitive parts becoming faulty during long transportation or the possibility of vehicle breakdowns that impose losses on the company.
• Building regional warehouses and reducing the heavy costs of the central warehouse.
• Controlling the system better and the potential to constantly improve.

5. Discussion and Conclusions

• Employing a multi-period model along with the power of inventory management so that it leads to reduced costs and increased revenue.
• With respect to the variety of available products, the number of product groups should be increased and included in the proposed model.
• Reducing the time of ordering periods to better use the multi-period model, supplying faster and more up-to-date customer demands in the year, and removing the barriers of the inventory cost increase through modeling and making decisions at the tactical and operational level.
• Raising the number of customers and applying the proposed model to the actual number of customers. It is worth mentioning that in this model, they were integrated into the provincial centers to facilitate the modeling of customer demand.
• Constructing regional warehouses in the locations suggested by the model outputs considering the construction cost and setting up and storing the goods in these warehouses.
• Launching the central warehouse number 2 when its effectiveness gets approved in all the models to properly benefit from it.
• Regularly controlling the proposed performance evaluation indices considering the possibility of changing the supply or demand pattern and making suitable decisions accordingly.
• Investigating the demand pattern in various time periods and the possibility of presenting a supplementary model for the probability mode of demand.
• Investigating the profit from waste recycling.
• Investigating the benefits of the brand’s mental image in terms of compliance with environmental issues.
• Considering production issues in the supply chain and distribution system.
• Including the demand of the different classes of customers in the distribution system and locating facilities; accordingly, in other words, assessing the effect of marketing decisions on the strategic macro-decisions of facility location.
• Considering other location benchmarks.
• Determining the order supply deadline for all sorts of goods orders and programming to supply them within the deadline and its effect on facility location problems.
• Considering other objective functions like social aspects, employment rates, and environmental impacts according to the priorities of managers and decision-makers.

Author Contributions

Data availability statement, conflicts of interest.

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Khalilzadeh, M.; Antucheviciene, J.; Božanić, D. A Bi-Objective Model for the Multi-Period Inventory-Based Reverse Logistics Network: A Case Study from an Automobile Component Distribution Network. Systems 2024 , 12 , 299. https://doi.org/10.3390/systems12080299

Khalilzadeh M, Antucheviciene J, Božanić D. A Bi-Objective Model for the Multi-Period Inventory-Based Reverse Logistics Network: A Case Study from an Automobile Component Distribution Network. Systems . 2024; 12(8):299. https://doi.org/10.3390/systems12080299

Khalilzadeh, Mohammad, Jurgita Antucheviciene, and Darko Božanić. 2024. "A Bi-Objective Model for the Multi-Period Inventory-Based Reverse Logistics Network: A Case Study from an Automobile Component Distribution Network" Systems 12, no. 8: 299. https://doi.org/10.3390/systems12080299

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Roster management through transfers continues to be a focus of Georgia Tech football

Credit: Jason Getz

Since taking the full-time job as Georgia Tech’s football coach in November 2022, Brent Key has said he would be strategic about how he used the NCAA’s transfer portal.

For Key, it never has been about simply scooping up the best available players looking for a new place to play, or necessarily about collecting players with only one season remaining in their eligibility as a sort of quick fix to a positional need. Yes, Tech has signed its fair share of one-and-done transfers the past couple of recruiting cycles, but for the most part Key and his staff are looking for transfers who can make an immediate impact and provide depth for multiple seasons.

“I look at it no differently, really, then the NFL,” Key said this preseason. “There’s two philosophies: you build your team, in the National Football League, you build it through the draft and supplement through free agency or you lean a little heavier toward the free agency part of it. It’s no different in college now. You have the high school recruiting part of it and then you have the acquisition through transfers, which is really collegiate free agency, for lack of a better word.”

Tech’s 2024 roster is another case study in how Key has gone about building the latest version of his program. Many of the programs newcomers who transferred in during the offseason will be thrust into the starting lineup while others will play vital roles on the depth chart and could be standouts in seasons to come. And specific position groups clearly relied on the transfer portal more than others.

Tight end was one of those spots when the 2023 team saw the departure of Dylan Leonard and Luke Benson. Tech went out and got Ryland Goede (Mississippi State), Jackson Hawes (Yale) and Josh Beetham (Michigan), the former two having only one season to play with the Yellow Jackets.

“I think right away from the get-go, of the schools that were talking to me, I saw something really special with Georgia Tech,” Hawes said. “I had, like, a 1-on-1 conversation with coach Key over the phone, which was really special. And not only that, but (conversations with) the entire offensive staff. I saw something really special in what they’re building here and I wanted to really be a part of that.”

Another area of focus for Key was on defense, where he stacked the roster with college-experienced at all positions. Up front Tech got linemen Romello Height (Southern California), Thomas Gore (Miami) and Jordan van den Berg (Penn State). Linebackers E.J. Lightsey (Georgia) and Jackson Hamilton (Louisville) are now Jackets, and the secondary has been upgraded with the additions of Warren Burrell (Tennessee), Syeed Gibbs (Rhode Island), Zachary Tobe (Illinois) and Jayden Davis (Cincinnati).

Burrell is expected to start at cornerback when Tech opens the season Aug. 24 against Florida State in Dublin.

“From a football aspect, it’s a team that’s on the rise,” Burrell said. “Everything about this team was trending upward. I believe in myself enough to help give that boost. Everything kind of checked all the boxes so it made sense.”

The influx of transfers, especially on defense, doesn’t equate to a complete overhaul of Tech’s personnel, but rather the creation of a symbiotic relationship between newcomers and returners. Key said to do that he studies NFL franchises, like the Detroit Lions, Kansas City Chiefs, San Francisco 49ers, Philadelphia Eagles and New England Patriots, among others, and how they go about constructing their rosters.

College football’s new era in which players can transfer and play immediately, opposed to the previous rule of being required to sit out at least one season when signing with a new school in the same division, is an era that Key is clearly trying to take advantage of during the early stages of his Tech tenure.

“It has been able to help us,” Key added, “and I think you see a lot more depth on the football team because of it.”

About the Author

Chad Bishop is a Georgia Tech sports reporter for The Atlanta Journal-Constitution.

Credit: Miguel Martinez