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Sending AR statements is a standard accounting practice followed by many companies. However submitting AR statements cost time and effort while in many cases not yielding any beneficial benefit depending on the size of the organizations. Large organizations may not provide statements without requested and feel that it is just a waste of paper with little impact on collections while a small business may find statements very handy. It is easy to misplace invoices since small business procedures are not as well developed as in larger organizations.
Let's briefly analyze the pros and cons of sending AR Statements and you could decide whether it is important or not to have it as a part of your accounting procedure.
Pros-
– AR statements are the financial tool of communication with the customers. While most clients pay only from invoices, statements are a real reminder especially to those clients that know that they are sitting on your working capital
– Helps in reconciliation and resolving issues with customers on documents faster
– Statements are reminders of outstanding amounts and give the customer a chance to challenge incorrect charges to their account that they would otherwise not be aware of. This helps in building customer relations
– Sending AR statements also helps you calibrate your move to more aggressive collection efforts. Otherwise, you allow your customers the excuse of simply explaining, "Well, I never received your invoice."
– Sending A / R Statements could help conceal a fraud scheme
Cons-
– Many large organizations believe that sending AR Statement is just a waste of paper (and postage) with little impact on collections
– Some accounts that do request statements are more interested in finding old credits that can apply rather than worrying about what is due or past due
– Some believe that rather than sending statements, the more effective option may be to personally contact the customer on specific over-due invoices. This can be done by phone, e-mail or automated electronic e-mail delivery
– There are utility programs that will monitor your data and send out automatic e-mail reminders to your customers based on days outstanding. Unlike AR statements, no postage, labor or human action is needed in this method
Conclusion
The key to efficient collections is to know how your customer pays-do they require copies of receipt docs and POs or maybe a proof of delivery document. Each office has their own processes and idiosyncrasies that A / R personnel need to understand and work around. The faster you provide what they need the faster you get paid. This may require phone calls to smooth the way like a follow-up to ensure they have everything they need and that it's entered in the system. If you are currently providing statements, you might try not sending them for a month to see if anyone notices or cares. In sum, the value of statements depends on your situation and customers.
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Source by Priyankar Baid
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