Size-The size of accounts receivable is usually assessed relative to the amount of credit sales. This seems appropriate because credit sales give rise to accounts receivable (accounts receivable earns no return after the discount period has expired). Most firms do not separately disclose credit sales, so net sales are usually used. This is figured using the following ratio:

accounts receivable as a percentage of sales =

Adequacy of allowance for uncollectible accounts (an overall estimation of the accounts receivable amounts that will not be collected). These are presented as a contra-asset account that is subtracted from the accounts receivable. This is figured using the following ratio:

Allowance for uncollectible accounts

The implication this has for managers is that management should attempt to maximize the return on accounts receivable. Managers must also decide which customers will be granted cred

Revenue assurance is also a company issue. A company has the responsibility to assure all possible revenue is not only accounted for, but also available to be placed on an invoice. Each department within the business in one-way or another, needs to work with each of the other departments. Some of the departments involved in this process include:

Uncollectible accounts policy. (2000). Retrieved 5/17/01 from the World Wide Web: http://www.investopedia.com

1) Shorten the time spent on support activities. Increase the time spent contacting delinquent accounts. 2) Increase the effectiveness of each contact. 3) Increase the number of contacts in a specific time period. 4) Provide immediate follow-up documentation to the customer. 5) Generate additional feedback. However the single-most clear benefit to an automated collection system is the ability to collect receivables faster. Rapid collection of accounts receivable is vital to the success of any company.

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