First Person: Organizing Accounts Receivable in 5 Easy Steps

Contributor Network Tue, Apr 24, 2012 10:42 AM EDT Print Having walked into a situation in which I was charged with the handling of a major organization’s accounts receivable that largely hadn’t been dealt with for several months, I know just how important keeping this aspect of a company’s finances organized can be. Letting accounts receivable stagnate even for just a week or two — let alone months — had me scrambling to keep up. But I found that once I caught up with them, if those that accounts were kept in an organized manner, and I maintained them on a regular basis, it made things much simple to manage. Here’s how I organized my accounts receivable in five easy steps. Review and Learn Accounts Getting accounts receivable into order likely won’t happen overnight. Especially if you’re stepping into a situation in which you aren’t familiar with all or even any of the accounts, it can take time to get to know your way around.
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Guide to the Private Account Receivable Financing in the competitive Financial Markets. Courtesy of Universal Business Structured Solution.

Over the same time span, we looked for a 5% increase or better in quarterly sales and at least a 5% decrease in accounts receivables. To further whittle down the list, we added the following criteria: market capitalization greater than $300 million, long-term debt totaling no more than 60% of total capitalization and projected annual profit growth of 5% or greater over the next three to five years. On the valuation end, all companies have latest visit this site 12-month price-to-earnings ratios below 25 and price-to-sales multiples below their five-year averages. We ran a similar screen in May 2002. As of yesterdays close, that batch of stocks was up 25% versus a 1% price gain for the S&P 500 index. Its Nice To Be Loved, But Its Better To Get Paid Prices as of Oct. 21.
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Useful Metric: Accounts Receivable

The accounts receivable turnover ratio is calculated by dividing a companys sales by its accounts receivable, (sales/accounts receivable). The ratio is also an indication of a companys financial liquidity. The lower the ratio, the greater a companys liquidity.
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Accounts Receivable Turnover Ratio

Any accounts receivable over 90 days might be not financeable, or financeable at the greater discount. There are numerous players In the Account Receivable Financing Industry. Most of them are generalists and have no industry preference, some have a very narrow specialty dealing, with only for example medical or construction receivables. Benefits of Account Receivable Financing 1. Quicker Funding Accounts Receivable Financing provides a company with an immediate opportunity of converting credit sales into immediate cash flow for the business. By getting outstanding invoices or receivables monetized, company is able to get money in the quickest way possible and gain immediate access to working capital for the business. 2. No Equity Dilution Unlike Mezzanine or Venture Capital, funding of Accounts Receivable does not require the relinquishment of the company’s equity.
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