What is accounts receivable management?

Accounts receivable management means that a company manages all outstanding invoices from its customers. Once an invoice has been sent, it is considered an outstanding receivable. From that moment it must be recorded, monitored and later marked as paid.

Accounts receivable management therefore ensures that the company always knows which customers still owe money and how much is outstanding.

The term describes a dedicated area within the finance organization. This area deals exclusively with processes related to unpaid invoices.

This includes, for example, entering the invoice into a system. Observing the payment deadline is also important. In addition, an incoming payment must be recorded.

Accounts receivable management therefore has a simple task: it monitors every outstanding invoice until the money has been received in full. In this way, an overview of all outstanding receivables is maintained.

What is the importance of accounts receivable management?

Accounts receivable management means that a company does not lose sight of its outstanding invoices. It ensures that the entire area of receivables remains clear, complete, and understandable.

For many processes within a company, it is important to know which invoices have already been paid and which are still outstanding. Accounts receivable management provides exactly this information.

It clearly shows:

Which invoices are currently outstanding?
How high the outstanding amounts are.
Which payment deadlines are still outstanding
Which invoices have already been paid

This overview shows which receivables exist and what the current status is. The term therefore describes not only a task, but a central function within the company: maintaining an overview of outstanding items.

What does accounts receivable management include?

Accounts receivable management encompasses all activities related to outstanding invoices. The tasks may look simple, but they are important. This prevents invoices from being lost or recorded incorrectly.

This area includes, among other things:

Enter invoices:Every new invoice is stored in the system.
Monitor payment deadlines:The system indicates by when the payment is expected.
Record incoming payments:As soon as payment is received, it is allocated to the correct invoice.
Update outstanding amounts:The system displays the current status at all times.
Mark overdue invoices:If an invoice is not paid on time, it remains visible.
Maintain customer data:Addresses, contact details and other information must be correct.

All of these tasks ensure that each invoice is accurately represented in the system from start to finish.

How does accounts receivable management work?

Accounts receivable management works step by step. The process is always similar, no matter how large the company is.

It starts with creating and sending an invoice. As soon as the invoice has been sent, it is stored in the system. After that the actual administration begins.

The typical procedure is as follows:

1
The invoice is created and saved.
2
The system displays the payment deadline.
3
It is regularly checked whether the payment has been received.
4
If the money is transferred, it is credited immediately.
5
The outstanding amount will be adjusted or set to zero.
6
If no payment is made, the invoice remains open or overdue in the system.

This process keeps the invoice visible at all times. Nothing disappears, and the payment status is always clearly traceable.

Who is involved in accounts receivable management?

Various departments are involved in accounts receivable management. Exactly which ones are involved depends on the company's size and structure.

In many companies, the accounting department handles most of the tasks. It works daily with invoices, payments, and data.

For example, the following may be involved:

Bookkeeping, who checks outstanding invoices and records payments.
Accounting, which organizes and controls processes
Receivables management, which handles special tasks related to outstanding receivables
IT or data teams, which ensure that the system runs reliably

All departments work together to ensure the reliable management of outstanding invoices.

When is accounts receivable management used?

Accounts receivable management comes into play whenever an invoice has been sent and the payment is still outstanding. From that point on, the invoice must be monitored.

The service therefore begins immediately after the invoice is sent and continues until full payment has been received.

It is active:

Immediately after sending the invoice.
Throughout the entire payment period.
As soon as an invoice is overdue
Until the payment was finally posted.

In doing so, accounts receivable management oversees every process related to an outstanding invoice.

Where does accounts receivable management take place?

Accounts receivable management usually takes place in a company's finance department. That's where the teams that work daily with invoices, accounting entries, and payment statuses are based.

Today, companies mainly use digital systems that automatically display or monitor many steps. Nevertheless, people still have to oversee the processes and enter the data correctly.

Typical areas are:

The accounting
Accounting
Digital accounts receivable or accounting software

Even though software makes much work easier, responsibility still lies with the company itself.

What is the purpose of accounts receivable management?

Accounts receivable management is used to manage outstanding invoices in a clear and organized way. It ensures that nothing is lost and every payment is properly allocated.

This keeps the entire area of outstanding receivables clearly structured.

Accounts receivable management helps with:

To make outstanding invoices visible.
To correctly reflect incoming payments
To keep track of all outstanding receivables.

This creates an easy-to-follow view of all a company's outstanding invoices.