There are several controls in accounts receivable. A thorough audit should be daily comparing the checklist and the system records in customers’ accounts. This is to ensure the payment received is applied to the right customer. A second control is to check if customers’ balances in record are true. One simple way is to send current statements to customers monthly. Customers can help identify if there is any discrepancy between their record and the account statement. A third control is to reconcile customers’ accounts in a periodic basis. A transaction can be recorded only in customers’ account when a copy of final invoice is received. All the transactions should have the invoice as backup. A fourth control is the separation of duty. The person who has authority to approve order cannot record invoice in the system. An accounts receivable personal shouldn’t receive payment directly and should not have authority to access cash account. A fifth control is to have restricted control on customers’ accounts files including all necessary backup to support their account balance and creating new accounts. If there is no restriction access, anyone can alter or destroy records and backups. Without all proper backups, an account is less likely collectable. Even if it can be collected, it will prolong the return cycle. Only authorized personal can create accounts. This stops someone from creating dummy account for illegal use. A sixth control is on credit limit. The authority to prove credit limit should be given to credit manager only. If credit manager is absent, controller should take the responsibility. The credit manager should receive a credit application from customers. Then, he/she needs to reach out to the reference for credit check. Based on the feedback, he/she can approve the credit limit.
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