Implementing Accounts Receivable Ledger in Small Businesses

Joanne’s Party Supplies

The purposes of an accounts receivable subsidiary ledger

Joanne uses an accounts receivable subsidiary ledger to see the customers who have bought on credit from Joanne’s Party Supplies. This allows her to keep track of customer payments and concentrate on getting payments from debtors with overdue payments. By having details of the accounts receivable activity in a subsidiary ledger, Joanne is able to better control her business’ financial information. It includes a separate account for each customer who makes credit purchases, and the combined balance of every account in this subsidiary ledger equals the balance of accounts receivable in the general ledger. This is essential to Joanne’s Party Supplies because it provides Joanne quick access to each customer’s balance and account activity. At the end of each

If they do not pay after the reminder is sent, it will highlight to Joanne any overdue amounts of that particular debtor, and she can immediately chase them up. Getting debtors to regularly pay will speed up her business’ cash flow. However, when Joanne is unable to get the money back from the debtor after this, Joanne will write the quantity off as a bad debt, as shown in … . To prevent bad debts from occurring, Joanne can establish a firm Credit Policy to protect her business’ cash. The Credit Policy must have the potential customer’s name, date of birth, employment, place of residence, credit history, clear payment terms and credit limits, and address non-payment and bad debts. These will allow Joanne to check if the customer is credit worthy, and also if she is checking the correct person. When she does this, Joanne can make sure she sells on credit to only customers who are likely to pay her back, and make sure her business’ cash flow is not too badly affected. Credit limits are important because they allow debtors to manage how much they can pay