tailieunhanh - Risk and management Accounting Best Practices_4

Tham khảo tài liệu 'risk and management accounting best practices_4', tài chính - ngân hàng, kế toán - kiểm toán phục vụ nhu cầu học tập, nghiên cứu và làm việc hiệu quả | 152 Credit and Collections Best Practices By reducing the number of customers who take discounts a company can make more selective use of this tool. There are three problems with using an early payment discount. One is the cost. To entice a customer into an early payment the discount rate must be fairly high. A common discount rate is 2 percent which translates into a significant expense if used by all customers. Another problem is that it is somewhat more difficult to apply cash against accounts receivable if a discount is taken. Depending on the facility of the accounting software an accounting clerk may have to go to the extreme of manually calculating the discount amount taken and charging off the difference to a special discounts account. Finally a discount can be abused. If a customer is already stretching its payments it may take the discount rate without shrinking its payment interval to the prescribed number of days. This can lead to endless arguments over whether the discount should have been taken which the customer will win if it makes up a large enough percentage of a company s sales. Granting early payment discounts can significantly reduce the amount of a company s overdue accounts receivable but this is at the high cost of the discount which can be abused by some customers. Accordingly this best practice should be used with care to improve the payment performance of selected customers. Cost Installation time 7-7 Conduct Immediate Review of Unapplied Cash ự Author s Choice It is a common occurrence for a collections person to call a customer about an overdue invoice only to be told that the check was already sent. Upon further investigation the collections staff finds that for a variety of reasons the errant check has been sitting in an accounting clerk s in box for several weeks waiting to be applied to an invoice in the accounts receivable aging. Common reasons for not performing this cash application include not having enough time not .