Md.Mustakim Ahmed 🧙‍
Jasbir Singh
Ajay
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Outstanding customer accounts

Outstanding customer accounts

Summary:

  1. What is an outstanding receivable?
  2. How to calculate an outstanding customer ?
  3. How to control the outstanding customer balance?

 

What is an outstanding receivable?

Outstanding accounts receivable is the total amount of accounts receivablei.e. the the total amount that customers owe to a company.

An outstanding receivable may include:

  • The outstanding invoices (due date passed and not paid),
  • The unpaid invoices issued but not yet due (due date not passed and not paid),
  • As well as unissued invoices,

L’outstanding represents the unpaid amount of services provided by a company. But it should not be confused with debts to suppliers or customer credit. L’outstanding receivables is an assetunlike theoutstanding supplier which is a liability.

The outstanding customer balance is an important important indicator for a company. It can be used to measure the financial health of the company.

And a good management of it often reveals a good level of good cash flow. It can also be used to assess the ability of clients to repay their debts.

In the event that thecustomer outstanding is very highthis would put pressure on the available cashdifficulties to pay salariesdifficulties in paying salaries, a lengthening of the DSO, as well as a payment default.

But then how to follow it? How to calculate it correctly?

 

How to calculate an outstanding customer ?

As we have seen, the customer receivable corresponds to the sum of receivables that the company has with its customersThis is the amount of money that customers have not yet paid.

For calculate the outstanding customerYou have to add up all the amounts due by the customers, deducting the payments (and possible deposits) already made.

Total receivables = outstanding due invoices + outstanding issued invoices + unissued invoices.

Outstanding client = Total receivables – Total payments received.

Let’s take the following example, company “E” has receivables of 50 000€ from its customers (C1, C2 and C3). Clients C1 and C2 paid a deposit of 20,000 euros before the service.

50 000 – 20 000 = 30 000 euros

Then theoutstanding customer of the company “E” will be 30 000 euros.

 

How to control the outstanding customer balance?

Solutions to control cash flow and manage customer risk
customer risk management
are numerous. They imply a real follow-up of the customers.

  1. Conducting an audit of past payments. How long does it take your customers to pay your invoices? How many days late are your customers on average? How many customer follow-ups did you have to set up? All of these answers will allow you to establish a score for each of your customers. You will be able to take personalized decisions with a clear history.
  2. Establish effective payment tracking. You now have access to a history. This allows you to focus on “bad” or “late” customers. This allows you to check all transactions that are coming due. Without waiting for the litigation. You will then have to make numerous manual reminders to manage the collection. However, this solution takes a long time.

Automate dunning and payment customers with a collection
collection solution
. Aston iTF allows you to create dunning plans and automated scenarios. You personalize all your reminder messages to make them more effective. You benefit from a payment link to speed up the collection process. And you follow in real time all your cash flow and your receivables all on a single platform.