Question

Customers who have large A/R balances ultimately end up as bad debt expenses to the firm. Identify and discuss at least three (3) things you can do via QuickBooks to control A/R so that it does not become a bad debt expense for the firm. Justify your response.

Answer 1

Three things we can do via Quickbooks to control our Account Receivables(A/R) are:-

1. Discount

This practice is quite common. We can provide discounts to our customers for early payment. For e. Discount of 2% if payment is made within first 7 days, 2% discount if payment made within next 7 days. Such discounts acts as an incentive to make early payments.

Also, with the help of Quickbooks, we can automate this discount calculation process for all our customers.

Moreover, it can also hep us to analyse that we are actually benifiting from providing such discounts. In some cases, amount of discount given can drastically impact our profit margins. This usually happens with products which have very low profit margin.

2. Financial charges such as Interest, Penalty

We can select an option of applying financial charges such as interest or penalty on the customers who have not made their payments in their assigned time.

We can apply this with Quickbooks under "Edit" the choose "Preferences" therein select "Finance Charge". Also, Quickbooks provide us with the flexibility of selecting minimum and maximum financial charge amount, grace period, interest rate, and various other things.

Also, with the help of Quickbooks we can easily find out the customers who make maximum faults and can decide to make no further sale to these customers keeping in mind that it is feasible for us.

3. Online Payment

It provides us with a mechanism wherein the customers can pay to us using electronic media. This feature drastically helps in availing payment from customers as people are using electronic mode of payments more these days.

We can enable this functionality by going in "Edit" then click on "preferences" then select "Payments".