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What Accounts Receivable Mean for the Company There are times when buyers would find it very hard to give money to sellers in full especially with huge investments but fortunately, there are sellers out there who will allow this kind of buyers to just compensate them in a later due date. This act may put you in a good light in the eyes’ of the public with your magnanimous and unselfish behavior but what not everyone may know is that this step also acts as an advantage for the company in the form of the accounts receivable. For those people who becomes debtors of a company and have to recompense the company for the purchase they have made, they will receive information about the purchase and credit in every month that passes, in the form of bill statements or invoice.
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The invoice and billings statement will contain the price of the purchase which the customer has made and also includes shipping fees and taxes that comes with the purchase.
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This basic concept is just common knowledge and something that many individuals could learn through classes or even the internet. The matters of accounts receivable is easy to understand but if you delve in deeper to the matter and learn more about accrual and even the cash-basis accounting, you’ll surely find the whole matter to be more intricate than you expect. This is where the company exercise their advantages in accounts receivable by manipulating and controlling how the money goes into and out from the financial books of the company. Continue reading on this article and learn more about how cash-basis works, the most commonly used accounting method by companies. Amazingly, this Account Receivable management lends the company and the customer a hand in avoiding to pay a certain tax amount for a year and is more often fitter to be used during the end months of a year. What basically happens through this method is that the company wouldn’t put the cash flow on the financial book right after the purchase as they will just put it on the next year when the buyer finally pays for it. Through this technique, the buyer and the seller wouldn’t have to settle the payment of tax for that particular transaction not until the end of the year when it was finally placed on the financial book. There are other methods out there that the company could possibly use for their accounts receivable recording process, but the benefits which this accounts receivable management technique could bring still makes it the most ideal choice for businesses.