Accounts Receivable (AR) Services encompass all the activities and processes involved in managing the money owed to a business by its customers. Effective AR management is crucial for cash flow, profitability, and customer relationships. It's a current asset on the balance sheet.

Components of Accounts Receivable Services

1. Credit Management & Customer Onboarding:
   • Setting credit policies and limits.
   • Performing customer credit checks and risk assessments.
   • Establishing clear payment terms.
2. Invoice Generation & Delivery:
   • Creating accurate, detailed, and timely invoices.
   • Sending invoices via email, portal, or EDI (Electronic Data Interchange).
   • Managing recurring/billing.
3. Payment Processing & Application:
   • Receiving payments (check, ACH, credit card, wire).
   • Accurately applying payments to specific invoices.
   • Handling partial payments and short payments.
   • Managing cash application (a major pain point if not automated).
4. Collections Management:
   • Proactive follow-up on overdue invoices (dunning).
   • Staged collections processes (reminders, calls, escalation).
   • Dispute and deduction resolution.
   • Maintaining professional customer relationships.
5. Deduction Management:
   • Investigating and resolving reasons for short payments (e.g., claims of damaged goods, pricing disputes, promotional deductions).
   • Recovering funds or writing off valid claims.
6. Reporting & Analytics:
   • Key Metrics: Days Sales Outstanding (DSO), Aging Report, Collection Effectiveness Index (CEI), bad debt percentage.
   • Cash flow forecasting.
   • Customer payment behavior analysis.
7. Account Reconciliation:
   • Ensuring the AR sub-ledger matches the general ledger.
   • Preparing for month-end and year-end closes.