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Why is Accounts Receivables Management Important


Accounts Receivables represent the single most important source of cash for all organizations offering trade credit; and cash is the lifeblood of an organization.
Naturally then a strong, well-organized Accounts Receivables Management function becomes a critical function for companies. It helps the company to:
  1. Accelerate cash flow - Managing and collecting receivables effectively helps a company accelerate its cash flow.

  2. Improve the working capital cycle - Accounts Receivables represent revenue; collecting them fast helps a company to improve its working capital cycle.

  3. Enhance customer satisfaction - Accounts Receivables collection serves as a service touch point for virtually all customers; managing it effectively can enhance customer satisfaction.

  4. Manage conflict -Accounts Receivables collection involves managing and balancing conflicting priorities.

  5. Reduce costs - Accounts Receivables represent outstanding; delay in collection can lead to heavy costs for companies, as much as 19% of a company's revenue.

Together these benefits translate into superior organizational value. Poor Accounts Receivables Management, on the other hand, exposes a company to great financial risk.
Risk in terms of bad debts, cost of money, administration and follow up costs. Often these costs are disguised. Check, you might be suffering from them too?Cost of Poor ARM
Given these facts you would presume that most companies would have a good ARM system in place. Not really. Effective ARM represents a very difficult challenge, a challenge most companies are unable to meet. .... ARM: A Difficult Challenge


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