Importance of Accounts Receivable Analysis
PracticeForces, a medical billing solutions provider in Florida, provides medical billing services, including accounts receivable analysis, for doctor’s offices in Florida. Co-founders Kunal Jain and Parul Garg put their accounting acumen and coding expertise to work for their clients every day. They strive to educate struggling business owners about the importance of receivables accounting in maintaining strong cash flow, collecting debts efficiently, and planning future business growth.
What Is Accounts Receivable Analysis?
Accounts receivable analysis gives businesses a picture of what percentage of their debts they can successfully collect over a given period of time. If a business uses cash basis accounting, revenue that comes in when their customers pay their bills will only appear on the balance sheet when they have the funds in hand. This uncertainty of debt collection can make it difficult to project future revenue.
Accounts receivable analysis provides a quantitative assessment of the incoming revenue and how it compares to what the business should receive if everybody paid their debts on time. For example, consider the importance of knowing receivable turnover. The receivables turnover ratio measures how much of a business’s sales revenue consists of debts yet to be paid.
The Power of Accounts Receivable Analysis
An accountant or financial manager could calculate the receivables turnover ratio by dividing sales revenue by accounts receivable. If the number is high, it could indicate that customers tend to pay their bills quickly or that the company is overly cautious when extending credit. A low receivables turnover ratio indicates that unpaid debts are cutting into the business’s revenue stream.
The receivables turnover ratio is just one of the statistics that accounting and billing consultants can use to assess the effectiveness of the business’s debt collection efforts. They could also look at the average number of days it takes for bills to be repaid, the eventual status of delinquent accounts, and the success rate of different debt collection methods.
Quantitative Analysis Generates Actionable Business Insights
Accounts receivable analysis addresses the change in debt repayment over time. A sharp decrease in the receivables turnover ratio, for instance, could mean that customers are having financial trouble paying bills, that the company has been too lenient in extending credit, or that the accounts receivable process has become inefficient.
The founders of PracticeForces are small business owners with nearly two decades of experience in medical billing and management consulting. The company helps businesses track their accounts receivable, streamline debt collection operations, and identify problems with the business’s revenue cycle management. For more information about accounts receivable analysis or medical billing in general, contact PracticeForces at (727) 499-0351.
